singerlewak newsletter - july 2012
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SingerLewak Newsletter - July 2012TRANSCRIPT
ASSURANCE & ADVISORY____________________________________________________________
CFO Essentials Briefing: Implementation of Section 952 of the Dodd-Frank Act
TAX____________________________________________________________
IRS Provides Additional Guidance on Local Lodging Costs Incurred by Employees
ENTERPRISE RISK
MANAGEMENT SERVICES____________________________________________________________
Managed Service Providers Forget Their Roots and Take to the Clouds!
July 2012
From the Managing Partner
THE VALUE OF THESUMMER HUSTLE
Contents______________________________________________________________________________________________________________________________________________________
FROM THE MANAGING PARTNER2 THE VALUE OF THE SUMMER HUSTLE
Summer seems to have snuck up on us this year, and if we aren’t careful, next year will arrive before we’re ready. And what came in with the heat? It seems little. Right now, everything is up in the air, and the future is far from clear—just as it has been for the last several years—more so, even.
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ASSURANCE & ADVISORY4 CFO ESSENT IALS BRIEF ING:
IMPLEMENTAT ION OF SECT ION 952 OF THE DODD-FR ANK ACTIn Final Rulemaking Release No. 33-9330 , Listing Standards for Compensation Committees, the SEC has issued final rules implementing Section 952 of the Dodd-Frank Act (which added Section 10C to the Exchange Act). Section 952 relates to the following:
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TAX6 IRS PROV IDES ADDIT IONAL GUIDANCE ON LOCAL LODGING
COSTS INCURRED BY EMPLOYEESThe Internal Revenue Service issued proposed treasury regulations on the tax treatment of local lodging costs incurred by employees. These regulations provide additional guidance on when employees are allowed to deduct them as business expenses and are not required to treat them as additional compensations if reimbursed by their employers.
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ENTERPRISE RISK MANAGEMENT SERVICES7 MANAGED SERV ICE PROV IDERS FORGE T THE IR ROOTS AND
TAKE TO THE CLOUDS!With the rise of Cloud computing, we are rapidly entrusting more of our data, our computer power and business-critical software applications off-site and into the Cloud.
July 2012
1 | SingerLewak July 2012
F R O M T H E M A N A G I N G PA R T N E R
Summer seems to have snuck up on us this year, and if we aren’t careful, next year will arrive be-fore we’re ready. And what came in with the heat? It seems little. Right now, everything is up in the air, and the future is far from clear—just as it has been for the last several years—more so, even. The Presidential election (and all of its implications) looms just around the corner. Tomorrow’s tax laws seem in flux, or at best unclear. The regulatory environ-ment seems to change daily, and rarely in a way that makes op-erating easier. The economy just sort of grinds on, but only barely. And the capital markets are still unpredictable and don’t provide much indication of what is to come either. With all this go-ing on, it seems easiest to sit and wait—see what happens next, before making any decisions.
Over the recent years, many have made changes in our businesses and home lives to address the economic situation. Companies have cut costs, streamlined opera-tions, made difficult staffing and hiring decisions, delayed retire-ments, and held onto profits, sav-ing what cash they can for either
(a) the rainy day when things get worse, or (b) expansion and growth strategies for when things get better.
But now is not the time to avoid difficult decisions. Waiting for uncertainty to disappear is like waiting for paint to dry. As all of you know, difficult decisions face companies all of the time. Deci-sions should be made based on the Company’s Strategic Vision, and not necessarily on short-term uncertainty. To be sure, the economic and business environ-ment has a significant impact on decision making, but that impact should be within the context of a Company’s strategy.
STRATEGIZE BUSINESS AND RISK MANAGEMENT:
In these times, it is doubly important to develop and imple-ment company level visions and
strategies, and build the appro-priate tactical execution plans around them. These execution plans should be appropriately modified for the level of risk associated with the uncertain-ties that surround the business, but the vision and strategies to achieve it should not be shelved.
CONTINUE TO ACT:
You should continue to act on your strategy. Waiting and wondering, hunkering down, only results in short-term benefit. Eventually, your competitors, or the marketplace will adapt to the Company’s lethargy.
For instance, waiting for tax laws to change before selling the company may have some per-ceived benefit. But weigh that benefit against the possibility that the business will decline, or valuations may decline, or your competitive advantage will wane over time, all of which may have a more significant impact on your sale price. There are always trade-offs. And waiting for the unknown may not be the best strategy.
Likewise, if, in order to reach a vision, it is important to acquire
July 2012 SingerLewak | 2
THE VALUE OF THE SUMMER HUSTLEBY JIM PITRAT | MANAGING [email protected] | 310.477.3924
3 | SingerLewak July 2012
businesses, then the company should be hunting for acquisi-tion candidates. In this environ-ment, the actual vetting process and evaluation of those potential acquisitions may be more mea-sured, managed for risk. Or decisions regarding acquisitions might even be more influenced by competing risk-management strategies, like cash conserva-tion. But the activities should not cease. They should become more disciplined and refined.
Harvey Goldstein, a previous Managing Partner of mine, and a man I respect a great deal, once who had a sign on his desk that read, “Good Things Come to Those Who Wait…But Only Those Things Left by Those Who Hustle.” The adage is true—and doubly true in these environ-ments. There are only so many good opportunities in this envi-ronment, and if your company isn’t looking for them, someone else will find them.
LOOK FOR OPPORTUNITIES:
The uncertainty also may provide
opportunities that enhance the company’s ability to reach its vision. Strategies should be de-signed to look for those opportu-nities. We should not be afraid to reach beyond what we are doing to find these diamonds.
• Are there competitors that are struggling ones that the company could acquire?
• Are there competitor product lines ones that the company could acquire? Or can the company find complimentary product lines to acquire?
• Are there key employees at competing firms that have been laid off that are unhappy or available?
• Is there some pricing opportu-nities that we can take advan-tage of?
• Are there opportunities at our customers to make them happy, take care of them as they struggle through this time, that would make our relationships more solid?
• Is there equipment/capacity out there that we can pick up
on the cheap to help with cost structures?
• Do valuations help facilitate wealth transfers between heirs or others.
The potential opportunities are endless and bound only by man-agement’s imagination.
So, yes summer is here. And it is hot. The world hasn’t changed so much since last season or last year. And many businesses continue to follow wait-and-see approach to management. That may be conservative, or safe, or even safe in the short term. But, it will doubtfully help in getting you where you want to go, unless it is part of the overall strategy to reach the company’s vision.
JIM PITRAT CAN BE REACHED AT [email protected]
OR 310.477.3924
IMPLEMENTATION OF SECTION 952 OF THE DODD-FRANK ACTBY JIM PITRAT, CPA | MANAGING [email protected] | 310.477.3924
In Final Rulemaking Release No. 33-9330, Listing Standards for Compensation Committees, the SEC has issued final rules implementing Section 952 of the Dodd-Frank Act (which added Section 10C to the Exchange Act). Section 952 relates to the following:
a. exchange listing standards for compensation committees of issuers with listed equity securities, and
b. disclosures in proxies and in-formation statements regard-ing conflicts of interest raised by the work of compensation consultants.
LISTING STANDARDS RELATING TO COMPENSATION COMMITTEES:
According to the final rules:
• Each national securities ex-change and national securities association must prohibit the initial or continued listing of any equity security of an issuer that is not in compliance with the independence require-ments (as defined in 10C-1
as it relates to compensation committees)
• This rule is subject to the following exemptions (exemp-tions generally relating to spe-cific securities), among others:
a. Standardized options, and security futures
b. Limited partnerships.
c. Companies in bankruptcy
d. Open-end management investment companies
e. Foreign private issuers (If reasons for not having an independent compensation committee is disclosed in Form 20-F).
f. Listed companies when more than 50% of the voting power for the elec-tion of directors is held by an individual, a group, or another company.
g. Smaller reporting compa-nies.
• Exchanges are required to establish their own indepen-dence requirements.
• Exchanges must consider the following when establishing their independence require-ments:
1. The source of compensation of a committee member, and
2. Whether a compensation committee member is affili-ated with the issuer.
• Each member of the compen-sation committee must be a member of board of directors and independent.
• A compensation committee is permitted to obtain the advice of a compensation consultant (which could include indepen-
A S S U R A N C E & A DV I S O RY
July 2012 SingerLewak | 4
5 | SingerLewak July 2012
dent legal counsel and other compensation advisers).
• Listed issuers must provide funds for the compensation of such advisers.
• A compensation adviser is not required to be independent.
• However, the following inde-pendence factors must general-ly be taken into account before engaging one:
- Other services provided to the company.
- The amount of fees from the issuer received by the indi-vidual engaging the adviser as a percentage of that indi-vidual’s total income.
- Conflict of interest policies and procedures of the indi-
vidual engaging the compen-sation adviser.
- Business relationships be-tween the adviser and com-mittee members.
- Stock of the company owned by the adviser.
- Any business or personal rela-tionship of the compensation advisor with an executive of the issuer.
ITEM 407(E) OF REGULATION S-K, Compensation committee, has been amended to require disclo-sure of the nature of a conflict of interest raised by the work of a compensation consultant, and how it is being addressed.
The exchanges must propose new or amended listing standards to
comply with the requirements within 90 days following publica-tion of the final rules in the Feder-al Register. Furthermore, within one year exchanges are required to issue listing standards fully complying with new Rule.
The new disclosures must be included in proxy or information statements covering any annual meeting of shareholders, or special meeting at which directors will be elected (which occurs on or after January 1, 2013).
JIM PITRAT CAN BE REACHED AT [email protected]
OR 310.477.3924
July 2012 SingerLewak | 6
IRS PROVIDES ADDITIONAL GUIDANCE ON LOCAL LODGING COSTS INCURRED BY EMPLOYEES
TA X
The Internal Revenue Service issued proposed treasury regula-tions on the tax treatment of local lodging costs incurred by employees. These regulations provide additional guidance on when employees are allowed to deduct them as business expenses and are not required to treat them as additional compensa-tions if reimbursed by their employers.
Local lodging costs are gener-ally considered personal expenses whereas lodging costs related to travel away from home are gener-ally considered trade or business expenses if certain conditions are satisfied. Therefore, employees are not allowed to deduct lodg-ing costs unless they are related to travel away from home. If the local lodging costs are reim-bursed by their employers, then the employees may have to treat them as additional compensation for tax purposes.
With the newly issued regula-tions, the Internal Revenue Service is proposing to clarify circumstances under which lo-cal lodging costs can be treated as trade or business expenses and not as personal expenses to employees. Under the pro-
posed regulations, these costs are deductible to employees if they are considered ordinary and necessary expenses incurred in carrying on a trade or business, and the determination of whether
these costs are ordinary and necessary in carrying on a trade or business will be based on facts and circumstances.
In addition, the proposed regu-lations provide a safe harbor to employees for deducting local lodging costs as business expens-es. Under the safe harbor rule, employees are allowed to deduct the local lodging costs required for a bona fide business meeting or function and their employers require them to stay overnight, as long as the lodgings meets the days and frequency limitation re-quirements in the regulations and they are not lavish and extrava-gant with significant personal benefits.
As your tax and business advi-sors, we want to make sure that you are aware of the planning opportunities that are currently available. Please feel free to con-tact any of our tax professionals with any questions you have regarding this or any other tax issues.
Local lodging costs are generally considered
personal expenses whereas lodging costs related to travel away from home are generally considered
trade or business expenses if certain conditions are
satisfied
E N T E R P R I S E R I S K M A N AG E M E N T S E R V I C E S
With the rise of Cloud comput-ing, we are rapidly entrusting more of our data, our computer power and business-critical soft-ware applications off-site and into the Cloud. And these services – whether described as “managed” or not – are only as reliable as the wire down which they are delivered, therefore providing a complete and network-integrated service has never been more im-portant. Getting a complete solu-tion that includes full network management is not something that is common anymore, but it is getting better.
Things were so simple in the 1990s. Back in those heady early
days of the web, businesses usu-ally needed a technology “service provider” for one thing only – Internet connectivity. There was a plethora of Internet Service Providers (ISPs) to choose from as they sprang up to take advan-tage of the new market demand. The 90s were great times to be an ISP; yet take a look around now and you’ll see that few of these providers still exist as independent entities, and still fewer position themselves as mere “Internet” Services Providers.
Many are either out of business or have been completely remod-eled as Manages Services Pro-viders (MSP) or Cloud Services Providers (CSP).
Cloud providers now offer any number of services, from host-ing, backup and data storage to managed security, CRM and
Software as a Service (SaaS). All these services, like those pro-vided by MSPs, fulfilling genuine
Getting a complete solution that includes full
network management is not something that is
common anymore, but it is getting better.
MANAGED SERVICE PROVIDERS FORGET THEIR ROOTS AND TAKE TO THE CLOUDS!BY RICK MARK | SERVICE AREA [email protected]
7 | SingerLewak July 2012
The 90s were great times to be an ISP; yet
take a look around now and you’ ll see that few of these providers still exist as independent
entities, and still fewer position themselves as
mere “Internet” Services Providers
RICK MARK CAN BE REACHED AT [email protected]
OR 818.251.1323
business needs and bringing real benefits to end-users. But as the “Service Provider” tag evolved
from ISP to MSP to CSP, the fo-cus became less on providing an holistic, end-to-end service, and more about offering the widest variety of services and capabili-ties to end users. This results in needing multiple vendors though, to manage the areas not currently
being managed by these provid-ers – such as the network itself.
The world has become ever-more reliant on Cloud services and the importance of network reliabil-ity and accountability has never been greater. If the xSP’s are to play their part in helping custom-ers overcome these issues, Man-aged and Cloud Service Providers need to reconnect with their heritage in connectivity. While we cannot hope to return to the simplicity of the 1990s, MSPs can still fulfill their original purpose: to take responsibility for the management and operations of its most critical IT functions.
If managing your technology, IT Staff and 3rd party service pro-viders has become increasingly
difficult – email us at [email protected] and one of our Business Technology Management Services profession-als will help to shed some light at the end of the IT Tunnel.
July 2012 SingerLewak | 8
The world has become ever-more reliant on Cloud services and the importance of
network reliability and accountability has never
been greater
SEPTEMBER 20SILICON VALLEY
SEPTEMBER 27LOS ANGELES
As part of our CFO Essentials Roundtable series, please join us for a spirited panel discussion focused on what it takes to get solid information systems in
place - why it’s important and how to build systems that deliver ROI and provide a competitive advantage.
PRESENTERS:Seth Fineberg, Technology Editor, Accounting Today
Bill Sutman, CFO, formerly with Relativity MediaMark Linden, CFO, Intacct Software
Jim Hart, Manager - Software Selection Expert, SingerLewakBob Green, CPA.CITP, Partner and Practice Leader, SingerLewak ERMS - Moderator
For more information, please visit www.SingerLewak.com/news.
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SingerLewak is a leading regional accounting services firm in California with offices in Los Angeles, Orange County, Wood-land Hills, Monterey Park, San Diego, Silicon Valley and San Francisco. Serving California since 1959, SingerLewak has established a reputation for excellence as professionals with unparalleled expertise in the Accounting and Management Consulting industry. Providing the services of a large firm with a blended environment of practices, industry specializations and particular attention to hands-on service, SingerLewak continues to demonstrate leadership and industry growth year-over-year. Our client relationship approach and industry excellence is renowned.
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