CPA FIRM TOP ISSUES DIAGNOSTIC REPORT

CPA FIRM TOP ISSUES DIAGNOSTIC REPORT

What is PCPS? Add-on firm membership section of the AICPA Rooted in the quality of practice and peer review, PCPS now focuses on CPA firm advocacy and practice management PCPS staff and leadership are comprised of experienced CPAs and volunteer practitioners who are proactively engaged and involved in the changing business landscape Works to understand issues faced by CPA firms, their clients and staff 3 PCPS: Center for Firm Practice Management What issues keep practitioners awake at night? What issues are shaping the future of the profession? What are firms priorities? Are practitioners leveraging available opportunities? How are firms keeping up with today s dynamic economic environment? 3

PCPS is the Home for Firms at the AICPA 6 0 CPAs 2+ CPAs 20 CPAs Sole Practitioners 2 5 CPAs 6,400 Firms and 67,800 CPAs Represented 4 PCPS CPA Firm Top Issues Survey Conducted biannually Gathers information from practitioners across the country representing firms of different sizes Used to understand the critical challenges facing PCPS member firms 5 2

PCPS CPA Firm Top Issues SOLE PRACTITIONERS 203 20 2009 2007 Keeping up with changes and complexity of tax laws Keeping up with changes and complexity of tax laws Retention of current clients Tax complexity and change 2 Bringing in new clients Retention of current clients Keeping up with changes and complexity of tax laws The effect on firms caused by new regulations and standards 3 Seasonality/workload compression Bringing in new clients The effect on firms caused by new regulations and standards Keeping up with standards 4 Retention of current clients Keeping up with accounting and attest standards Keeping up with standards Keeping up with technology 5 The effect on firms caused by new federal and state regulations Seasonality/workload compression Work/life balance initiatives Work/life balance initiatives 6 PCPS CPA Firm Top Issues FIRMS WITH 2 5 PROFESSIONALS 203 20 2009 2007 Keeping up with changes and complexity of tax laws Bringing in new clients Retention of current clients Finding qualified staff 2 Succession planning Retention of current clients Keeping up with changes and complexity of tax laws The effect on firms caused by new regulations and standards 3 Finding qualified staff Keeping up with changes and complexity of tax laws The effect on firms caused by new regulations and standards Tax complexity and changes 4 Bringing in new clients Seasonality/workload compression Keeping up with standards Keeping up with standards 5 Seasonality/workload compression Keeping up with accounting and attest standards Work/life balance initiatives Retaining qualified staff 7 3

PCPS CPA Firm Top Issues FIRMS WITH 6 0 PROFESSIONALS 203 20 2009 2007 Succession planning Bringing in new clients Retention of current clients Finding qualified staff The effect on firms caused 2 Finding qualified staff Retention of current clients Retaining qualified staff by new regulations and standards The effect on firms caused 3 Bringing in new clients Retaining qualified staff by new regulations and standards Retaining qualified staff 4 Retaining qualified staff Keeping up with changes and complexity of tax laws Keeping up with changes and complexity of tax laws Keeping up with standards 5 Owner/partner accountability and unity Fee pressure/pricing of services Bringing in new clients Succession planning 8 PCPS CPA Firm Top Issues FIRMS WITH 20 PROFESSIONALS 203 20 2009 2007 Bringing in new clients Bringing in new clients Retention of current clients Finding qualified staff 2 Finding qualified staff Owner/ partner accountability and unity The effect on firms caused by new regulations and standards The effect on firms caused by new regulations and standards 3 Succession planning Retention of current clients Retaining qualified staff Retaining qualified staff 4 Retaining qualified staff Succession planning Bringing in new clients Keeping up with standards 5 Retention of current clients Finding qualified staff Keeping up with standards Succession planning 9 4

PCPS CPA Firm Top Issues FIRMS WITH 2+ PROFESSIONALS 203 20 2009 2007 Owner/partner accountability and unity Owner/partner accountability and unity Retention of current clients Finding qualified staff 2 Bringing in new clients Bringing in new clients Owner/partner accountability and unity Retaining qualified staff 3 Retaining qualified staff Retention of current clients Succession planning Developing new partners 4 Succession planning Fee pressure/pricing of services Bringing in new clients Work/life balance initiatives 5 Finding qualified staff Succession planning Retaining qualified staff () Management of human resources (2) Seasonality/workload compression 0 203 PCPS CPA Firm Top Issues SOLE PRACTITIONERS 2 KEEPING UP WITH CHANGES AND COMPLEXITY OF TAX LAWS 3 SEASONALITY/WORKLOAD COMPRESSION 4 5 RETENTION OF CURRENT CLIENTS THE EFFECT ON FIRMS OF NEW FED & STATE REGULATION AND INCREASING COSTS TO COMPLY FIRMS WITH 2 5 PROFESSIONALS 2 3 4 KEEPING UP WITH CHANGES AND COMPLEXITY OF TAX LAWS SUCCESSION PLANNING FINDING QUALIFIED STAFF 5 SEASONALITY/WORKLOAD COMPRESSION FIRMS WITH 6 0 PROFESSIONALS FIRMS WITH 20 PROFESSIONALS FIRMS WITH 2+ PROFESSIONALS SUCCESSION PLANNING 2 FINDING QUALIFIED STAFF 2 FINDING QUALIFIED STAFF 2 3 3 SUCCESSION PLANNING 3 4 RETAINING QUALIFIED STAFF 4 RETAINING QUALIFIED STAFF 4 5 PARTNER ACCOUNTABILITY & UNITY 5 RETENTION OF CURRENT CLIENTS 5 PARTNER ACCOUNTABILITY & UNITY RETAINING QUALIFIED STAFF SUCCESSION PLANNING FINDING QUALIFIED STAFF 5

PCPS CPA Firm Top Issues Succession, succession, succession Client retention and client acquisition remain a priority Human capital concerns are back finding and retaining qualified staff are in the top five for all firm sizes with more than two professionals Keeping up with tax laws and workload compression are the biggest concerns for small firms Owner/partner accountability and unity remain issues for larger firms 2 Keeping Up THE PCPS CPA FIRM Changes/Complexity 203 TOP ISSUES of DIAGNOSTIC Tax Laws and Federal/State REPORT Regulations 6

203 PCPS CPA Firm Top Issues SOLE PRACTITIONERS 2 KEEPING UP WITH CHANGES AND COMPLEXITY OF TAX LAWS 3 SEASONALITY/WORKLOAD COMPRESSION 4 5 RETENTION OF CURRENT CLIENTS THE EFFECT ON FIRMS OF NEW FEDERAL & STATE REGULATIONS FIRMS WITH 2 5 PROFESSIONALS 2 3 4 KEEPING UP WITH CHANGES AND COMPLEXITY OF TAX LAWS SUCCESSION PLANNING FINDING QUALIFIED STAFF 5 SEASONALITY/WORKLOAD COMPRESSION FIRMS WITH 6 0 PROFESSIONALS FIRMS WITH 20 PROFESSIONALS FIRMS WITH 2+ PROFESSIONALS SUCCESSION PLANNING 2 FINDING QUALIFIED STAFF 2 FINDING QUALIFIED STAFF 2 3 3 SUCCESSION PLANNING 3 4 RETAINING QUALIFIED STAFF 4 RETAINING QUALIFIED STAFF 4 5 OWNER/PARTNER ACCOUNTABILITY & UNITY 5 RETENTION OF CURRENT CLIENTS 5 OWNER/PARTNER ACCOUNTABILITY & UNITY RETAINING QUALIFIED STAFF SUCCESSION PLANNING FINDING QUALIFIED STAFF 4 Keeping Up AICPA Tax Section Webcasts Washington Tax Brief Tax Power Hour 2 Resources Tax Practice Resources Webpage 3 Up-to-date Information Tax E-Alert 4 5 7

Keeping Up Health Care Health Care Reform Resource Center 5 PCPS toolkit includes: Strategy checklist Customizable brochures for individual clients and small and large business clients Timelines including important provisions and effective dates Implications of the law for individuals and business clients Ways that CPAs can assist clients Staff training and client PowerPoint templates 6 Client Acquisition and Retention THE PCPS CPA FIRM 203 TOP ISSUES DIAGNOSTIC REPORT 8

203 PCPS CPA Firm Top Issues SOLE PRACTITIONERS 2 KEEPING UP WITH CHANGES AND COMPLEXITY OF TAX LAWS 3 SEASONALITY/WORKLOAD COMPRESSION 4 5 RETENTION OF CURRENT CLIENTS THE EFFECT ON FIRMS OF NEW FEDERAL & STATE REGULATIONS FIRMS WITH 2 5 PROFESSIONALS 2 3 4 5 KEEPING UP WITH CHANGES AND COMPLEXITY OF TAX LAWS SUCCESSION PLANNING FINDING QUALIFIED STAFF SEASONALITY/WORKLOAD COMPRESSION FIRMS WITH 6 0 PROFESSIONALS FIRMS WITH 20 PROFESSIONALS FIRMS WITH 2+ PROFESSIONALS SUCCESSION PLANNING 2 FINDING QUALIFIED STAFF 2 FINDING QUALIFIED STAFF 2 3 3 SUCCESSION PLANNING 3 4 RETAINING QUALIFIED STAFF 4 RETAINING QUALIFIED STAFF 4 5 OWNER/PARTNER ACCOUNTABILITY & UNITY 5 RETENTION OF CURRENT CLIENTS 5 OWNER/PARTNER ACCOUNTABILITY & UNITY RETAINING QUALIFIED STAFF SUCCESSION PLANNING FINDING QUALIFIED STAFF 8 Client Acquisition and Retention Changing Landscape Reporting the Past Advising Today for the Future Advisory $ $$ 9 9

Client Acquisition and Retention The Journey to Digital CPA Status Digital CPA Today Advisory Adoption of innovative change across the entire firm. Transactional Using technology to support digital transactions only. Workflow Using technology to support highly efficient internal workflow processes. Integrated cloud apps End-to-end digital workflow Paperless office Transformational leadership to motivate others to action Integrated cloud technologies Best practices Staff Recruitment of the right staff to support a digital CPA firm Clients Transition of client base to online platform to support collaborative workflow Elevated business intelligence for real-time analysis of client data Higher-value client services Serve as clients TRUSTED BUSINESS ADVISOR 20 Client Acquisition and Retention New Service Opportunities Attestation engagements Statements of Control (SOC) reports Consulting and advisory services Trusted Business Advisor SM Workshop State and local tax (SALT) compliance Business process outsourcing Cloud computing Forensic services Financial services Specialized credentials 2 0

Client Acquisition and Retention Practice Growth 6 Manage seasonal lows and revenue generation Know your value and how to articulate it Strengthen client relationships Identify prospects and price appropriately Cross-sell and create new service mixes 22 Client Acquisition and Retention Tax Practitioners Toolkit 7 Educate Preparing you (and staff) to understand and articulate the value of your tax services Client satisfaction survey Talking points to overcoming objections to fees Engage Engaging with clients to stay top of mind CPA value and tax blurbs for the web and client newsletters Tax planning brochures Extension brochure with FAQs on this filing option PowerPoint on 203 tax year topics Promote Promoting your firm to attract new clients Sample client letters Sample social media posts **Updated annually for changes to tax law 23

Client Acquisition and Retention You Are The Value Online Workshop 8 24 Client Acquisition and Retention Trusted Business Advisor Workshop 9 State societies are providing this eight hour CPE eligible workshop to firm owners wanting to make the transition or firms can offer this program in-house for the entire staff Provides a process and supporting, customizable tools to aid client selection and encourage thoughtprovoking client conversations Assists practitioners to look beyond core accounting services and become more than a technical expert Teaches ways to knowledgeably and confidently present the CPA value and to price appropriately 2

Client Acquisition and Retention Trusted Business Advisor Toolbox 9 26 Client Acquisition and Retention Pricing & Profitability Strategies Action Plan 0 Action Result Product Champion Deadline Completed Examine current margins and test various price increase scenarios Identifies low margin business and identifies opportunities for optimizing pricing to increase profitability; benchmarks your profitability [Managing Partner] 2 Review client base and determine which clients are buying on price or value; determine what clients really want from your relationship Identifies clients that may be undesirable for the firm; identifies clients that need more focus to enhance your value to them [Firm Management] 3 Review your clients and the services you provide. Determine where you are providing core services and where you are providing valuable services Identifies opportunities to provide more client services to increase profitability [Firm Management] 4 Discuss how your firm develops its pricing in light of pricing discrimination Develops justification for high value market pricing [Firm Management] PCPS Practice Growth & Client Service Center 27 3

Seasonality/ Workload Compression THE PCPS CPA FIRM 203 TOP ISSUES DIAGNOSTIC REPORT 203 PCPS CPA Firm Top Issues SOLE PRACTITIONERS 2 KEEPING UP WITH CHANGES AND COMPLEXITY OF TAX LAWS 3 SEASONALITY/WORKLOAD COMPRESSION 4 5 RETENTION OF CURRENT CLIENTS THE EFFECT ON FIRMS OF NEW FEDERAL & STATE REGULATIONS FIRMS WITH 2 5 PROFESSIONALS 2 3 4 KEEPING UP WITH CHANGES AND COMPLEXITY OF TAX LAWS SUCCESSION PLANNING FINDING QUALIFIED STAFF 5 SEASONALITY/WORKLOAD COMPRESSION FIRMS WITH 6 0 PROFESSIONALS FIRMS WITH 20 PROFESSIONALS FIRMS WITH 2+ PROFESSIONALS SUCCESSION PLANNING 2 FINDING QUALIFIED STAFF 2 FINDING QUALIFIED STAFF 2 3 3 SUCCESSION PLANNING 3 4 RETAINING QUALIFIED STAFF 4 RETAINING QUALIFIED STAFF 4 5 OWNER/PARTNER ACCOUNTABILITY & UNITY 5 RETENTION OF CURRENT CLIENTS 5 OWNER/PARTNER ACCOUNTABILITY & UNITY RETAINING QUALIFIED STAFF SUCCESSION PLANNING FINDING QUALIFIED STAFF 29 4

Seasonality/Workload Compression PCPS Publications 30 Seasonality/Workload Compression Client Evaluations Client EvaluationTool 2 Client Disengagement Letter 3 3 5

Seasonality/Workload Compression Client Evaluation Assignment A Mature client. Always looking for additional potential services. Provides timely payments. Refers others to your firm. Enjoy working with this client. B Growing and emerging client. Needs other potential services. Provides timely payments. Enjoy working with this client. Future A. C Average client. Only wants traditional services. Provides timely payments. D None of the above. Messy work, late, rude and provides untimely payment. F Friends and family. Client Rankings A F 32 Seasonality/Workload Compression Three Tier Pricing Silver ($X,XXX) Preparation of corporate income tax returns Preparation of individual income tax returns for owner(s) Corporate tax planning Personal tax planning for owner(s) QuickBooks assistance Annual financial statement compilations Two meetings with practitioner Gold ($X,XXX) All silver tier items, PLUS: Semi-annual financial statement compilations Four meetings with practitioner Unlimited telephone support Development of a company strategic plan Evaluation or development of the personal financial plan of the owner(s) Platinum ($X,XXX) All gold tier items, PLUS: Quarterly financial statement compilations Full internal control review and recommendations Strategic planning retreat for the company An estate planning meeting with the owner(s) and development of a comprehensive estate plan Excerpted from the Pricing Tool in the TBA Toolbox 33 6

Human Capital Concerns THE PCPS CPA FIRM 203 TOP ISSUES Finding DIAGNOSTIC and Retaining Qualified REPORTStaff 203 PCPS CPA Firm Top Issues SOLE PRACTITIONERS 2 KEEPING UP WITH CHANGES AND COMPLEXITY OF TAX LAWS 3 SEASONALITY/WORKLOAD COMPRESSION 4 5 RETENTION OF CURRENT CLIENTS THE EFFECT ON FIRMS OF NEW FEDERAL & STATE REGULATIONS FIRMS WITH 2 5 PROFESSIONALS 2 3 4 KEEPING UP WITH CHANGES AND COMPLEXITY OF TAX LAWS SUCCESSION PLANNING FINDING QUALIFIED STAFF 5 SEASONALITY/WORKLOAD COMPRESSION FIRMS WITH 6 0 PROFESSIONALS FIRMS WITH 20 PROFESSIONALS FIRMS WITH 2+ PROFESSIONALS SUCCESSION PLANNING 2 FINDING QUALIFIED STAFF 2 FINDING QUALIFIED STAFF 2 3 3 SUCCESSION PLANNING 3 4 RETAINING QUALIFIED STAFF 4 RETAINING QUALIFIED STAFF 4 5 OWNER/PARTNER ACCOUNTABILITY & UNITY 5 RETENTION OF CURRENT CLIENTS 5 OWNER/PARTNER ACCOUNTABILITY & UNITY RETAINING QUALIFIED STAFF SUCCESSION PLANNING FINDING QUALIFIED STAFF 35 7

Human Capital Concerns What Are Other Firms Doing? Hiring veterans or moms returning to the workforce Connecting with local schools and beginning an internship process Using CollegeFrog.com or MyEdu.com to complement existing efforts Getting involved and participating on college boards Providing flexible hours and telecommuting options Partnering with local firms and sharing CPAs and interns 36 Human Capital Concerns PCPS Human Capital Resource Center 4 Firm Value Proposition Team Recruitment Action Plan Performance Management Templates Firm Competency Model Interview Questions Sample Recruitment Promotion Mentoring Guide Six Motivators Calculation Tool Firm Needs Assessment Flexibility Program Guide Finding Qualified Staff Retaining Qualified Staff 37 8

Human Capital Concerns Firm Competency Model (Career Ladder) 5 ASSOCIATE Learns and develops technical competence by completing a degree qualification and working toward CPA certificate Applies self diligently to learn and understand technical skills and on the job practices and business processes Researches technical issues and participates in technical discussions relating to client assignments Develops an understanding of client businesses SENIOR Has technical competence (degree qualification) and a relevant professional accreditation Has an identified area to specialize and refines skills, knowledge and expertise Applies technical knowledge and research in formulating client related recommendations Helps to solve complex business problems MANAGER Has a general knowledge and application of relevant professional standards, emerging laws and regulations and corporate governance requirements Refines skills, knowledge and expertise as a specialist in an identified technical field and/or industry Applies technical expertise and interprets laws, regulations and standards to formulate client related recommendations Solves complex business problems SENIOR MANAGER/DIRECTOR Has a good understanding of the prevailing business environment, industry and business processes Has a thorough knowledge and application of relevant professional standards, emerging laws and regulations and corporate governance requirements Is a specialist in a particular technical field and/or industry Abreast of changes in laws, regulations and standards and provides advice on the impact and implications to clients PARTNER Has a thorough understanding of the prevailing business environment, industry and business processes Has extensive knowledge and application of relevant professional standards, emerging laws and regulations and corporate governance requirements Is a specialist and known leader in a particular technical field and/or industry Actively seeks ways to apply knowledge, interpret and anticipate changes in laws, regulations and standards to provide advice to clients on the impact and implications 38 Human Capital Concerns Recruiting Brochures 6 39 9

Owner/Partner Accountability and Unity THE PCPS CPA FIRM 203 TOP ISSUES DIAGNOSTIC REPORT 203 PCPS CPA Firm Top Issues SOLE PRACTITIONERS 2 KEEPING UP WITH CHANGES AND COMPLEXITY OF TAX LAWS 3 SEASONALITY/WORKLOAD COMPRESSION 4 5 RETENTION OF CURRENT CLIENTS THE EFFECT ON FIRMS OF NEW FEDERAL & STATE REGULATIONS FIRMS WITH 2 5 PROFESSIONALS 2 3 4 KEEPING UP WITH CHANGES AND COMPLEXITY OF TAX LAWS SUCCESSION PLANNING FINDING QUALIFIED STAFF 5 SEASONALITY/WORKLOAD COMPRESSION FIRMS WITH 6 0 PROFESSIONALS FIRMS WITH 20 PROFESSIONALS FIRMS WITH 2+ PROFESSIONALS SUCCESSION PLANNING 2 FINDING QUALIFIED STAFF 2 FINDING QUALIFIED STAFF 2 3 3 SUCCESSION PLANNING 3 4 RETAINING QUALIFIED STAFF 4 RETAINING QUALIFIED STAFF 4 5 OWNER/PARTNER ACCOUNTABILITY & UNITY 5 RETENTION OF CURRENT CLIENTS 5 OWNER/PARTNER ACCOUNTABILITY & UNITY RETAINING QUALIFIED STAFF SUCCESSION PLANNING FINDING QUALIFIED STAFF 4 20

Owner/Partner Accountability and Unity Partner Accountability Guide 7 The Leadership Development Model is a trademark of and copyrighted by ConvergenceCoaching, LLC. 42 Owner/Partner Accountability and Unity What s the Big Deal? Things to consider As of 202, 7% of AICPA members were older than 40 years of age 79% of firms expect succession to be a significant issue in the next 0 years It takes 3-5 years to implement changes and ensure the smooth transition of clients and staff Partner role: - Before 995 entrepreneurial - 995-2008 technical - 2008-today blended Partners accountable for more than ever before 43 2

Owner/Partner Accountability and Unity CPA Horizons 2025 Toolkit 8 44 Succession Planning THE PCPS CPA FIRM 203 TOP ISSUES DIAGNOSTIC REPORT 22

203 PCPS CPA Firm Top Issues SOLE PRACTITIONERS 2 KEEPING UP WITH CHANGES AND COMPLEXITY OF TAX LAWS 3 SEASONALITY/WORKLOAD COMPRESSION 4 5 RETENTION OF CURRENT CLIENTS THE EFFECT ON FIRMS OF NEW FEDERAL & STATE REGULATIONS FIRMS WITH 2 5 PROFESSIONALS 2 3 4 KEEPING UP WITH CHANGES AND COMPLEXITY OF TAX LAWS SUCCESSION PLANNING FINDING QUALIFIED STAFF 5 SEASONALITY/WORKLOAD COMPRESSION FIRMS WITH 6 0 PROFESSIONALS FIRMS WITH 20 PROFESSIONALS FIRMS WITH 2+ PROFESSIONALS SUCCESSION PLANNING 2 FINDING QUALIFIED STAFF 2 FINDING QUALIFIED STAFF 2 3 3 SUCCESSION PLANNING 3 4 RETAINING QUALIFIED STAFF 4 RETAINING QUALIFIED STAFF 4 5 OWNER/PARTNER ACCOUNTABILITY & UNITY 5 RETENTION OF CURRENT CLIENTS 5 OWNER/PARTNER ACCOUNTABILITY & UNITY RETAINING QUALIFIED STAFF SUCCESSION PLANNING FINDING QUALIFIED STAFF 46 Succession Planning Demographic Trends 00% Age of AICPA Membership 90% 80% 70% 60% 50% 40% 30% >65 55 65 4 54 3 40 25 30 <25 20% 0% 0% 993 994 995 996 997 998 999 2000 200 2002 2003 2004 2005 2006 2007 2008 2009 200 20 202 47 23

Succession Planning 202 PCPS Succession Survey 9 Multi- Owner Firms 54% without written plan Sole Owners 94% without practice continuation agreement Leadership development is among the top challenges 39% intend to merge or sell 44% of firms in M&A talks Half expect to sell $ for $ of billings, actual is likely much less Few managing partners have ability to hold partners accountable 48 Succession Planning Best Practices Sole Owners 3-year written plan Identify exit strategies Practice continuation agreement Evaluate rates and clients Leverage technology Multi-Owner Firms 3-year written plan Improve operating policies and procedures Develop people Strong governance with robust compensation framework Define rules for retiring partners 49 24

Succession Planning PCPS Succession Resource Center 20 Succession Resource Center Chapters:. Introduction 2. Drivers of Change for the CPA Profession 3. Positioning Your Firm 4. Selling Your Firm 5. Merging Your Firm 6. Developing New Leaders 7. Turning Out the Lights 8. Transition Roles and Responsibilities 9. What is the Value of Your Firm 0. Due Diligence. Key Elements to a Partnership Agreement Transfer an Accounting Practice Checklist Due Diligence Checklist Available Tools tools Shareholder in Training Checklist Sample Practice Continuation Agreement 50 Succession Planning Emerging Partner Training Forum 2 Leadership Training Develop the full potential of new and emerging partners by preparing them for responsibility and leadership Who Should Attend? Managers on the firm partner track New Partners/Owners (five or fewer years of experience) Practice leaders seeking partnership skills June 23-24, 204 at AICPA offices in New York, NY and Durham, NC 5 25

Top Issues Other Firm Concerns Identity theft and working with the IRS continue to be a struggle Technology is rapidly changing and firms are skeptical about the cloud, security and privacy CPAs are receiving more requests for third-party verification letters (comfort letters) What are you experiencing? 52 Technical Developments THE PCPS CPA FIRM 203 TOP ISSUES DIAGNOSTIC REPORT 26

Technical Developments AICPA Advocacy Federal State regulation and legislation Tax ISSUES 54 Technical Developments Center for Plain English Accounting 22 AICPA PCPS National A&A Resource Center for Firms Services Written responses to written technical inquiries Monthly how-to A&A reports Webcasts Alerts Content for firm newsletters 27

Technical Developments Private Company Council As of June, 204, three ASUs have been finalized as GAAP alternatives in private company reporting Accounting for interest rate swaps (January 204) Goodwill amortization (January 204) VIEs (March 204) One topic currently on PCC s agenda Accounting for intangibles in a business combination 56 Technical Developments Private Company Financial Reporting 23 FRF for SMEs U.S. GAAP financial statements not needed OCBOA with structure Privately held small and medium enterprises Streamlined, cost-efficient Early adopter progress 28

FRF for SMEs New toolkit resources soon Working with state societies F/S user education campaign Regulators view as OCBOA [FRF for SMEs] could be a competitive tool for banks it s an option bank lenders should be aware of so as not to be at a disadvantage in prospecting for business in the SME space. Technical Developments Proposed Compilation, Preparation and Association Standards Exposure draft released Oct. 23, 203 Contains three proposed standards Comment period closed May 2, 204 Revised compilation standard Would apply when the accountant is engaged to perform the service rather than when the accountant prepares and presents the financial statements A report would always be required and the proposed standard would maintain the current requirement to modify the report when the accountant s independence is impaired 59 29

Technical Developments Proposed Compilation Standards Preparation standard Applies when financial statements are prepared but the accountant wasn t engaged to perform a compilation, review, or audit Requires a legend on each page stating that no assurance is being provided Association standard Applies when the accountant allows use of his or her name in a report, etc. that contains financial statements on which the accountant has not issued an audit, review, or compilation report Accountant would be required to read the financials for obvious material misstatements. 60 Technical Developments New Revenue Recognition Standard 24 FASB issued Accounting Standards Update (ASU) 204-09, Revenue from Contracts with Customers, on May 28, 204 Eliminates the transaction and industry-specific revenue recognition guidance under current U.S. GAAP Replaces it with a principle based approach for determining revenue recognition Has the potential to affect every entity s accounting Effective dates: Periods after 2/5/206 for public entities and 2/5/7 for non-public entities 30

Technical Developments Mandatory Firm Rotation Resources 25 Talking points developed for practitioners to use in discussing mandatory firm rotation concerns In 203 US House passed a bill to prohibit mandatory auditor rotation EU agreed in April 204 to adopt rules that go into effect in 206 62 Technical Developments When Does the AICPA Statement of Standards in Personal Financial Planning Services Apply to a Member? 26 Do you make personalized recommendations in one or more of the following activities? Cash flow planning Risk management and insurance planning Retirement planning Investment planning YES Do you represent to the public or clients that you provide PFP services? NO Do you engage in activities that would require registration as an investment adviser under federal or state law? NO YES YES The AICPA Statement on Standards in Personal Financial Planning Services applies. Estate, gift and wealth transfer planning Do you sell a product as a result of the PFP engagement? YES Elder planning Charitable planning NO Education planning Tax planning NO The AICPA Statement on Standards in Personal Financial Planning Services does not apply. However, the AICPA Code of Professional Conduct applies. Effective date of standard: July, 204 3

Technical Developments PCPS Technical Issues Committee 27 The TIC monitors technical developments that could significantly affect private companies and the firms that serve them When standards are written, the TIC submits informed comments and recommendations in support of small to medium size firms Financial Benchmarking THE PCPS CPA FIRM 203 TOP ISSUES DIAGNOSTIC REPORT 32

Financial Benchmarking Average Billing Rates from 202 MAP Survey Column <200K 202 <200K 200 200<500K 202 200<500K 200 500<750K 202 500<750K 200 Partners/Owners $26 $7 $60 $54 $80 $76 Directors * $99 $24 $27 $37 $27 Sr Managers * n/a $07 n/a $9 n/a Managers * $90 $89 $03 $09 $24 Sr Associates * $6 $87 $85 $98 $94 Associates $6 $65 $74 $68 $80 $76 New Professionals * $44 $63 $67 $67 $68 Column 750K.5M 202 750K.5M 200.5 5M 202.5 5M 200 5 0M 202 5 0M 200 Partners/Owners $99 $9 $230 $226 $259 $26 $33 $39 Directors $5 $46 $92 $80 $227 $220 $286 $275 Sr Managers $35 n/a $59 n/a $86 n/a $23 n/a Managers $9 $25 $4 $5 $60 $72 $94 $209 Sr Associates $04 $02 $7 $8 $3 $30 $50 $53 Associates $84 $84 $97 $94 $09 $05 $8 $2 New Professionals $72 $77 $8 $87 $9 $9 $05 $04 * = unable to measure based on limited responses n/a = not asked in 200 0M+ 202 0M+ 200 Financial Benchmarking 204 PCPS/TSCPA National MAP Survey 28 204 survey is open through July 3, 204 Participating firms get access to comparison data by region and firm size Put the benchmarking data to work in your firm Analyze costs Compare billing rates Examine write-downs And more All firms can participate 33

Consider Joining a PCPS Community 29 68 Questions? THE PCPS CPA FIRM 203 TOP ISSUES DIAGNOSTIC REPORT 34

THE PCPS CPA FIRM 203 TOP ISSUES DIAGNOSTIC REPORT Thank You! Please Contact Us! Mark Koziel mkoziel@aicpa.org PCPS Team pcps@aicpa.org 800.CPA.FIRM Visit aicpa.org/pcps Check out the spotlight section of the PCPS home page, which highlights other important issues 7 35

Index of Links. Keeping Up Washington Tax Brief http://www.aicpa.org/interestareas/tax/cpeandevents/pages/washingtontaxbrief.aspx 2. Keeping Up Tax Power Hour http://www.aicpa.org/interestareas/tax/cpeandevents/pages/taxpowerhour.aspx 3. Keeping Up Tax Practices Resources Webpage http://www.aicpa.org/interestareas/tax/pages/taxhomepage.aspx 4. Keeping Up Tax E-Alert www.aicpa.org/interestareas/tax/newsandpublications/taxealert/pages/default.aspx 5. Keeping Up Health Care Reform Resource Center aicpa.org/research/hcr/pages/health-care-reform.aspx 6. Client Acquisition and Retention Practice Growth http://www.aicpa.org/interestareas/privatecompaniespracticesection/practicegrowth/pages/defau lt.aspx 7. Client Acquisition and Retention Tax Practitioners Toolkit aicpa.org/career/marketing/pages/cpa-value-tax.aspx 8. Client Acquisition and Retention You Are The Value Online Workshop aicpa.org/interestareas/privatecompaniespracticesection/practicegrowth/pages/youarethevalu e.aspx 9. Client Acquisition and Retention Trusted Business Advisor Toolbox http://www.aicpa.org/interestareas/privatecompaniespracticesection/practicegrowth/trustedbusa dv/pages/tbalanding.aspx Index of Links (continued) 0. Client Acquisition and Retention Pricing & Profitability Strategies Action Plan http://www.aicpa.org/interestareas/privatecompaniespracticesection/practicegrowth/downloadab ledocuments/pricing%20profitability%20strategies%20action%20plan.xls. Seasonality/Workload Compression PCPS Publications http://www.aicpa.org/interestareas/privatecompaniespracticesection/newsandpublications/pages /default.aspx 2. Seasonality/Workload Compression Client Evaluation Tool http://www.aicpa.org/interestareas/privatecompaniespracticesection/practicegrowth/trustedbusa dv/downloadabledocuments/clientevaluationtool.xls 3. Seasonality/Workload Compression Client Disengagement Letter aicpa.org/interestareas/privatecompaniespracticesection/strategyplanning/firmstrategyandpl anning/pages/sample%20client%20termination%20letter.aspx 4. Human Capital Concerns PCPS Human Capital Resource Center http://www.aicpa.org/interestareas/privatecompaniespracticesection/humancapital/pages/default.aspx 5. Human Capital Concerns Firm Competency Model (Career Ladder) http://www.aicpa.org/interestareas/privatecompaniespracticesection/humancapital/performance management/downloadabledocuments/firmcompetencymodel.doc 6. Human Capital Concerns Recruiting Brochures http://www.aicpa.org/interestareas/privatecompaniespracticesection/humancapital/downloadabl edocuments/smallfirmrecruiting.pdf 36

Index of Links (continued) 7. Owner/Partner Accountability & Unity Partner Accountability Guide aicpa.org/interestareas/privatecompaniespracticesection/humancapital/ownerdevelopment/partn eraccountability/downloadabledocuments/partner%20accountability%20guide.pdf 8. Owner Partner Accountability & Unity CPA Horizons 2025 Toolkit http://www.aicpa.org/interestareas/privatecompaniespracticesection/strategyplanning/firmstrateg yandplanning/pages/pcpscpahorizons2025toolkit.aspx 9. Succession Planning 202 PCPS Succession Survey http://www.aicpa.org/interestareas/privatecompaniespracticesection/strategyplanning/center/ DownloadableDocuments/SuccessionSurveySoloFullResults.pdf http://www.aicpa.org/interestareas/privatecompaniespracticesection/strategyplanning/center/ DownloadableDocuments/SuccessionSurveyMultiFullResults.pdf 20. Succession Planning PCPS Succession Resource Center http://www.aicpa.org/interestareas/privatecompaniespracticesection/strategyplanning/center/ Pages/default.aspx 2. Succession Planning Emerging Partner Training Forum http://www.cpa2biz.com/ast/main/cpa2biz_primary/practicemanagement/practicedevelopme nt/prdovr~pc-ept4-durham/pc-ept4-durham.jsp http://www.cpa2biz.com/ast/main/cpa2biz_primary/practicemanagement/staffing/prdovr~ PC-EPT4-NYC/PC-EPT4-NYC.jsp Index of Links (continued) 22. Technical Developments Center for Plain English Accounting aicpa.org/cpea 23. Technical Developments Private Company Financial Reporting aicpa.org/frf-smes 24. Technical Developments Revenue Recognition Standard aicpa.org/revenuerecognition 25. Technical Developments Mandatory Firm Rotation Resources aicpa.org/pcps/mfr 26. Technical Developments PFP Standards http://www.aicpa.org/interestareas/personalfinancialplanning/resources/practicecenter/profess ionalresponsibilities/pages/pfpexposuredraft.aspx 27. Technical Developments PCPS Technical Issues Committee aicpa.org/ticadvocacy 28. Financial Benchmarking 204 PCPS/TSCPA National MAP Survey aicpa.org/mapsurvey 29. PCPS Communities aicpa.org/pcps/community 37