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Recent Articles Tuition Tax Credit Scholarship Program Preferred Family Limited Partnerships Rollover Right With Options Underwater, The Reprice
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More than numbers: Accounting firm relies on innovation to stay ahead of the pack. TO DOWNLOAD A PDF OF THIS ARTICLE CLICK HERE. The remarkable growth of Frazier & Deeter, LLC has less to do with crunching numbers and more to do with the Midtown accounting firm's entrepreneurial nature. At its core, the 28-year-old company is one of the top certified public accounting and advisory firms in the country. But Frazier & Deeter has constantly expanded; be it with service offerings, areas of expertise, numbers of employees, revenue or offices. It has plans to keep on growing. Over the last eight years, the firm has more than quadrupled revenues and doubled its number of employees. In 2009, the firm is expecting to clear $30 million in revenue and counts 180 employees in two metro Atlanta offices. The firm's revenue jumped from $7 million in 2001. Among the 4,600 CPA firms in the country, Frazier & Deeter constantly ranks in the top 100 as ranked by Accounting Today and Inside Public Accounting magazines, and was named the top midsized firm to work for by Accounting Today. “The people we hire want successful careers, and to give them successful careers, we have to grow in size, we have to grow in the depth of services we offer and we have to offer entrepreneurial opportunities,” said Jim Frazier, who along with David Deeter founded the firm in 1981. “If we don't do it, we die." That entrepreneurial spirit is the key, the founders said in an interview at their Bank of America building headquarters. And last year, the firm launched FD Capital Advisors, a corporate finance and investment banking affiliate. Earlier this year, Frazier & Deeter opened an office in Alpharetta, which it hopes will serve as an incubator for opening new offices in larger cities. As part of FD Alliance, the firm has partnered with accounting firms in Pittsburgh, Phoenix and Chicago, all cities where the partners said Frazier & Deeter would like to have a presence. Experience with recessions Jim Frazier and David Deeter had worked together at KPMG LLP, one of the Big 8 accounting firms at the time. Deeter told Frazier that he ever opened his own firm, Deeter would go with him. “David and I set up shop on July 1, 1981,” noted Frazier. “Times were tough in 1981. So we have a culture of thriving in recessions.” At the time, Deeter was all of 25 years old, and Frazier was not much older at 32. The two borrowed against their homes and maxed out their credit cards, renting 600 square feet downtown and hiring a secretary. “I remember sitting at [Jim Frazier's] kitchen table. ‘Let's write down the clients we think we have' and I remember writing down $8,500 for the year,” Deeter said. “ ‘So let's see, our rent is $1,100-$1,200, we are paying our secretary $1,100 a month,' or whatever it was and we'd borrowed this money from the bank already. [Frazier] said, ‘Don't worry about it.' I think we did $9,000–$10,000 the first month.” Frazier put the firm's success in the simplest of terms. “If you hire good people and get good clients and you provide good services, you don't have to worry about making money,” he said. One of the decisions that the young partners made at the beginning paid immediate dividends: choosing to open their office in downtown Atlanta. Not only did it position them to network with bankers, lawyers and business leaders, it also lent them instant credibility with future hires. “Hire younger and brighter,” said Frazier. That mantra holds true in 2009. A majority of the employees are in their 30s. Seth McDaniel, who has been with the firm since 2004, was drawn to the firm's culture. “What attracted me to the firm more than anything else is the entrepreneurial spirit,” he said. “Watching how the partners invest in new opportunities and worked on growing them and the speed and tempo with which we were able to make decisions as a group separates us from other firms,” McDaniel said. The hiring of McDaniel reflects how the firm's stature has grown. Coming from a high position with the Public Company Accounting Oversight Board (PCAOB), a private-sector, nonprofit corporation created by the Sarbanes-Oxley Act of 2002, McDaniel oversaw the auditors of public companies in the wake of the Enron debacle. Before becoming the associate director for the PCAOB, McDaniel was with KPMG and Deloitte. A mid-market firm hiring someone of McDaniel's standing was unheard of 15 years ago. Timing is everything The fall of Arthur Andersen and the consolidation of the industry that followed turned out to be a watershed moment for Frazier & Deeter. In 2002, Frazier & Deeter had grown to a 60-person firm when Arthur Andersen closed its doors. That presented Frazier & Deeter with what Deeter termed a unique opportunity. The firm was large enough at that point to have gained recognition as a firm that did things “the right way,” said Deeter. Suddenly, the firm was able to recruit people with national firm experience. “We just put our foot on the accelerator,” he said. Having a plan There were other factors that converged around that same time, according to Frazier, including the completion of the first strategic plan, which identified strategic strikes as a priority. That meant hiring individuals with specific skill sets that could help broaden the firms offerings to its clients. Of the jobs offered this past year, the firm experienced a 97 percent acceptance rate, and the only person who declined was for personal reasons. According to McDaniel, the firm is in the process of planning the next phase of growth; focusing on international tax and physically expanding into large offices are among the plans being discussed. At the same time, the firm is deepening its offering in public company auditing, litigation support, business evaluation and IT auditing. The firm is expected to announce a new managing partner in the coming month, who will replace Deeter — who has run the firm for the last eight years. Reprinted with permission from November 27, 2009 Atlanta Business Chronicle. Social Media Sites Raise New Questions for Employers Find Frazier & Deeter on twitter http://twitter.com/frazierdeeter and Linkedin user name frazierdeeter. Many companies have been trying to figure out how to harness the power of social media to generate business. Sites such as Twitter, Linked In, Facebook or personal blogs can be a terrific way to engage new customers, create buzz, and tell the story of your business. The flip side is employers are not the only ones using social media. Employees are too. It's natural for employees to talk about where they work and it's natural that they may sometimes complain about their job or their supervisors. However, while this type of venting was once relegated to casual talk at the bar or among friends, social media introduces a whole new layer of concern for employers. The first issue is accessibility. Derogatory comments repeated among employees in a social situation generally won't travel much further. But those same comments repeated in a virtual social situation can suddenly been seen by thousands, if not millions, of people. The natural urge is to curb employees' use of social media to protect your company's reputation or proprietary information. However, in doing so, you may be unintentionally creating liability on several fronts. And as social media is a relatively new medium, there is little case law to direct employers' actions. A large part of the debate is what is private versus what is public. If an employee posts something defamatory on a public site, then the employee is taking the chance his or her employer might see and react. However, if the employee posts something on a private site (i.e. Facebook) and the employer uses improper means to view the posting, then the employer is taking a chance of violating the Federal Stored Communications Act. For example, in Pietrylo v. Hillstone Restaurant Group d/b/a Houston 's , two employees were fired after posting sexual remarks about managers and customers on a password protected MySpace account. The employer gained access to the site through a third employee who gave the employer her password. If the third employee perceived that she would lose her job if she did not comply, then the labor laws would have been violated. In Pietrylo , the jury found that the third employee was impermissibly pressured into giving her password, thus violating the Stored Communication Act. Some companies have reacted by banning use of social media by their employees. While an employer is within its rights to ban use of social media on company time, it cannot dictate what employees do on their own time. Furthermore, overly broad social media policies could run afoul of employees' rights to have legitimate conversations regarding workplace conditions, terms, salaries and benefits as protected under Section 7 of the National Labor Relations Act, which protects employees' right to organize and bargain collectively. An employer may also be setting itself up for future litigation. Should an employer discover protected information about an employee (such as disability or sexual orientation) and the employee is later terminated, a jury could view the termination as discriminatory. Employers can terminate employees for defamatory statements published electronically, but how that information is acquired must be legal. Rothman Gordon strongly advises its corporate clients to incorporate social media policies into its current employee handbook and/or guidelines that are specific as to what is and is not acceptable. Reprinted with permission of Rothman Gordon's labor and Employment Law and Employment Litigation Departments. Tuition Tax Credit Scholarship Program Have you ever wanted a choice for how your tax dollars are used? Well, now you have one. The state of Georgia is giving you a choice - pay income taxes to the state or provide scholarships for students to attend qualified private schools of their parent's choice.
Example: Married couple contributes $2,500. They receive a $2,500 charitable contribution on their Federal return with a corresponding reduction in their state income tax deduction as a result of the $2,500 dollar for dollar credit on their Georgia return. For those not in alternative minimum tax (AMT) the net effect is that their federal tax liability will be the same, i.e. it costs them nothing to reallocate $2,500 of their state income taxes to their private school of choice. For those in AMT, their federal income taxes would go down by $725, as well as being able to reallocate $2,500 of their state income taxes to the private school of their choice. The reason is because of the different treatment of charitable contributions and state income taxes when calculating the AMT.
The Tax Dance Most years, year-end tax planning for securities trading is fairly straightforward: Clients should consider taking losses in taxable accounts. Those losses can shelter clients' gains from tax while up to $3,000 of net capital losses can be deducted on their tax return for the year. "Any net losses above $3,000 are carried over to future years," says Roger Lusby, tax partner at accounting firm Frazier & Deeter in Atlanta . Such loss carryovers can offset future realized gains and generate annual $3,000 tax deductions, until they've all been used. CH-CH-CH-CHANGES In 2009, though, year-end planning may be anything but straightforward because of the extraordinary events of 2008 and the uncertain prospects for future tax rates. In 2008, stocks had their worst year since the 1930s and many types of bonds also saw significant losses. By now, many clients have amassed a sizable "bank" of capital losses. "Capital loss carryovers are a valuable asset," says Glenn Frank, senior vice president at Wachovia, a Wells Fargo Company, in Waltham , Mass. "You want to maximize the benefit from that asset without hurting the portfolio." (Moreover, many mutual funds have realized and unrealized losses, so capital gains distributions might not be much of an issue this year.) After a first-quarter plunge, stocks rallied sharply this year, with some fund categories-such as Latin American stocks (63%), diversified emerging markets (46%), Pacific/Asia ex. Japan (45%), technology stock funds (39%)-up more than 35% for the year-to-date through August 31, according to data from Morningstar. "With the run-up in the market," Lusby says, "people do have some gains to help absorb the large carryovers from 2008." That is, losses may not have to be carried over for many years if they can offset realized gains in 2009. Tax rates, including the rates on long-term capital gains, are likely to rise, most observers predict. Upper-income taxpayers are especially vulnerable. The Treasury Department's Green Book, released in May, spelled out the Obama Administration's tax proposals. If Congress adopts its program, today's top 33% and 35% tax brackets will be raised to 36% and 39.6%; taxpayers in those brackets, including many financial planning clients, will see the tax on long-term gains raised to 20%. The Green Book puts the date for those increases at 2011. But rembmer, that's just a proposal. Congress could move tax-rate increases up to 2010, in an effort to cope with mounting budget deficits and to pay for any new healthcare plan. What's more, there is no guarantee that the capital gains rate will hold at 20%: Long-term gains were taxed at 28% as recently as 1998. This year, taxpayers in the 10% and 15% income-tax brackets can take advantage of a 0% tax rate on long-term capital gains. Thus, single taxpayers owe 0% on long-term gains as long as their taxable income is no more than $33,950 this year; for couples filing joint returns, the cutoff is $67,900. A married couple with $50,000 in taxable income, for example, could realize $17,900 in long-term gains by year-end and owe 0% on those gains. The 0% rate also is scheduled to run through 2010. According to the Treasury Department, the Obama Administration wants to make this rate permanent for low-bracket taxpayers. Again, there is no way to know how a future tax law will address this topic. LOSS LEADERS With all these circumstances to consider, how should financial planners advise clients on year-end trading? It may make sense to realize any losses from the 2007 to 2009 bear market and bank them against future gains. "We think that the capital gains tax rate is going up so we're harvesting all the losses we can," says Kathy Stepp of Stepp & Rothwell, a financial planning and investment advisory firm in Overland Park, Kan. "We're pretty much done by now because we started last fall." With a large bank of losses, future realized gains can be tax-free, no matter how high rates may go. Nonetheless, some planners should move cautiously to avoid taking excess losses, cautions Lisa Osofsky, a partner at Weiser, an accounting firm in New York City . "Some states, such as New Jersey , Pennsylvania , New Hampshire and Tennessee , don't permit capital loss carryovers," she says. "If the tax rates in those states are steep, investors might not want to take too many losses in one year." Suppose, for example, John Smith takes $50,000 worth of losses in 2009 and $20,000 worth of gains. His gains will be tax-free; he'll deduct $3,000 of excess losses from income and carry over $27,000 worth of losses on his federal tax return. However, some states will not recognize the carryover so future gains may be subject to state tax. "Often, states don't have a preferential rate for capital gains," Osofsky says. "In New Jersey , for example, there are no loss carryovers and some residents have a tax rate over 10% on their income and capital gains alike." CLEANING UP WASH SALES Clients who take capital losses must reinvest with care. "We rotate our trades to avoid wash sales," Stepp says. "We might sell Fund A and buy Fund B. Then we might sell Fund C 31 days later and buy back Fund A. At the end of the day, most of our clients are still fully invested but with newly-established lower cost bases and a boatload of capital losses to use in the future." As Stepp's comments indicate, one way to avert a wash sale—which would disqualify a capital loss-is to wait at least 31 days before buying back a security that was sold to realize a loss. Another is to buy something else that's similar, but not identical, to the security that was sold. "Yet another way to avoid a wash sale," Lusby says, "is to 'double up,' and then sell the original lot after 31 days." For example, a client who has a loss on 1,000 shares of ABC Corp. could buy another 1,000 shares of ABC, then sell the original holding 31 days later. This method allows the investor to stay ahead of possible sudden market moves and maintain a position in ABC at a set price. If the client wants a capital loss for 2009, though, this maneuver must begin by the end of November. FLEX PLANS After losses are realized and the wash-sale rules have been avoided, clients may enjoy both portfolio flexibility and tax efficiency. For example, clients might want to sell stocks or stock funds and reduce their equity exposure. "They can rebalance back to an asset allocation target after the recent run-up," Frank says, "or a client who thinks the stock market will pull back can take tax-free gains." In another situation, a planner might want to move a client from one stock or fund to another. For all of these scenarios, it's possible that some equity gains realized in late 2009 will be taxable as short-term gains because the stock market has spiked since early March. "You certainly do not want a net short-term gain," Frank says. "The taxes are much too heavy." Net short-term gains are taxed as ordinary income, at rates up to 35% this year. For tax purposes, gains and losses are taken in steps. Lusby explains this method: "Short-term gains and losses net with each other. Then long-term gains and losses net with each other. Then the two are netted." As a result, if losses of any type exceed gains (whether short- or long-term), the investor will not owe tax on those gains. For some clients, though, realized losses in 2008 and 2009 are so huge that it could take years to realize tax-free gains. (If you had clients who lost big in the tech bust, you're familiar with this problem.) If there are no realized gains to be offset, the only benefit from those losses will be a $3,000 annual tax deduction. The more gains clients can realize, tax-free because of net losses, and the sooner those gains can be realized, the more valuable those net losses will be. After all, even if tax rates are expected to rise sometime in the near future, taking gains today has a bird-in-the-hand quality: who knows if there will be gains to take tomorrow? Plus, some clients have such large losses (the S&P 500 Index is still down around 35% from its peak) that clients may be able to take gains today and still have unused losses for tomorrow's gains. STOCKING UP "If we have clients with large capital loss carryovers, we want to make sure they use them eventually," Frank explains. "We may shift bonds out of taxable accounts and replace them with equities, on the theory that equities are much more likely to generate gains than bonds and cash. Therefore, any gains will be tax-free until their carry-over is used up." If equities replace bonds in a client's taxable account, bonds will move to that client's IRA or other retirement plan. "This may be difficult for people who live off of the income from municipal bonds or muni funds in their taxable accounts," Frank says. "I suggest they live off the tax-free proceeds from stock sales as they sell stocks or stock funds to use up the carryovers. With their bonds held in their retirement account they have the same overall risk in their portfolio, but it's more tax-efficient." When the losses are used up, he can use the sales proceeds from selling stocks, tax-free, to buy munis in the taxable portfolio, for clients who want that income. Inside the IRA, he can sell munis and buy stocks, to get back to yesterday's asset location, if that's appropriate. Another strategy, according to Frank, might be to put some of the client's fixed income allocation into 529 college savings plans, which are tax-free. "Then you can hold the stocks in the parents' taxable account," he says, "where any gains can use up net losses or will be taxed at lower capital gains rates. The 529 plan might not grow enough to cover college costs, if it's invested in fixed income, but you can take money from the parents' taxable account to pay for any shortfall." Frank concedes that switching stocks and bonds between taxable and tax-deferred accounts can be a difficult concept for clients to understand. "With patience and client education, it's possible to overcome the problem," he says. "We explain that it is total portfolio performance that matters. We suggest they let us worry about where the money is coming from to meet their cash-flow needs. If we can generate the best overall after-tax performance without taking more risk than is appropriate, clients are more likely to meet their financial goals." ZERO TOLERANCE While many clients can take gains tax-free, thanks to realized net losses, there's another way to get untaxed gains this year: give appreciated securities to someone who can sell them and use the 0% rate. College students are possible recipients. "You have to make sure that there would be no loss of financial aid," Frank says, "as this would be the child's asset." You also need to deal with the kiddie tax rules. Full-time students under the age of 24 are considerd "kiddies" for tax purposes, so any investment income exceeding $1,900 (in 2009) will be taxed at the parent's rate-which probably won't be 0%. Nevertheless, giving these kiddies appreciated assets to sell would make sense as long as each child's unearned income remains under $1,900 this year. (Clients also may want to keep gifts to each child to under $13,000 per giver this year, to avoid gift tax problems.) If college financial aid is a concern in a client's family, once the child sells the appreciated securities in late 2009, to get the 0% rate, he or she can immediately spend the money on college bills. "There will be no financial aid problem so long as the money doesn't show up as an asset when the aid form is completed," Frank says. "Under the right circumstances this tactic might have a very high value that will be very tangible to the client." This 0% strategy can be used more extensively with relatives who are not subject to the kiddie tax, such as elderly parents and children age 24 or older. THE 15% SOLUTION For some clients, taking gains by year-end might be a savvy move, even if there are no offsetting capital losses and no practical ways to use the 0% rate. "If anyone is in a net gain situation and is thinking of selling something," Stepp says, "we are certainly taking a long, hard look at pushing for the sale in 2009 to take advantage of the 15% rate. On a rental property, for example, it may make sense to accept a slightly lower price if the client is going to save 5%-10% in federal taxes." As Frank puts it, "With a likely capital gains tax rate of 20% or more in the future, you may want to take gains at 15% now, if the gains would have been realized anyway in the next few years." On the other hand, he points out, a potential step-up in basis will be lost if an asset is sold by someone who might have left the appreciated investment in an estate. Under current—and probably future—tax law, an heir won't owe any capital gains tax on an inherited asset's appreciation during the decedent's lifetime, so paying tax at 15% could prove to be a waste of money. "Things as certain as death and taxes, can be more firmly believed," Daniel Defoe wrote in 1726, in The Political History of the Devil . Nearly 300 years later, death and taxes are still certain but the devilish details are giving financial planners ample opportunity to impress clients with truly astute advice. back to top Continued uncertainty about the federal estate tax makes many taxpayers (and their tax advisors) hesitant to update their estate plans until there is future tax legislation. About the only thing certain is that the federal estate tax will remain in place in some form or fashion. Over the years, family limited partnerships (FLPs) have come under attack by the Internal Revenue Service. Once the estate tax strategy of choice, FLPs are less in vogue since the unfavorable Strangi decision in 2003. Numerous articles have been written about FLPs that outline the various tax issues and the corresponding tax cases. As a result, and in order to leverage the transfer value, zeroed-out grantor retained annuity trusts (GRATs) and sales to intentionally defective grantor trusts (IDGTs) have become more popular. While GRATs and IDGTs are both effective estate tax strategies, they may not always be superior to preferred family limited partnerships (PFLPs). And yet, there are few tax advisors working with or recommending PFLPs. Overview A PFLP is statutory; it is specifically provided for in Section 2701of the Internal Revenue Code. The concept of Section 2701 is fairly simple. It provides for the creation of equity interests in a corporation or partnership with: (i) a preferred interest paying a fixed and certain rate of return; and (ii) a common interest that participates in all income, growth and appreciation above and beyond the preferred return. Section 2701 applies when the common interest is transferred to (or for the benefit of) a member of the transferor's family and the transferor retains the preferred interest. For this purpose, a family member includes any lineal descendant of any parent of the transferor or the transferor's spouse. In creating a PFLP, the value of the preferred interest is essentially “frozen” at the preferred capital rate of return. While a partnership interest, the preferred interest really functions more like a bond. “Freezing” the value of the preferred interest is a significant estate tax benefit as this allows any appreciation to inure to the holders of the common interests free of estate or gift tax. Section 2701 requires that the valuation of the common interests be derived under the “subtraction method” whereby the value of such interest equals the value of the entire partnership less any value attributable to the preferred interest. A preferred interest will always be valued at zero unless there is a right to receive a qualified payment. A qualified payment means any cumulative dividend payable on a periodic basis at a fixed rate. Simplified Example Setting-Up a PFLP Mr. Williams and his two children agree to create a PFLP. Mr. Williams transfers rental real estate valued at $8,000,000 into the partnership. In exchange, Mr. Williams receives a preferred partnership interest with an 8% cumulative annual net cash flow preference. Thus, Mr. Williams is entitled to receive an annual payout of $640,000 ($8,000,000 x 8%). His two children contribute $1,000,000 each of cash into the partnership in exchange for common units which are then transferred to GST trusts (or perhaps sold to an IDGT trust on a discounted basis). As a result, there is no gift tax upon formation, although the children would utilize some or all of their gift and GST tax exemptions in this example. In structuring a PFLP, the value of the common interest must be at least 10% of the total value of the partnership. Practically speaking, the greater the value of the common interest the lower the risk to the preferred partner. This, in turn, can have the effect of reducing the preferred return that is paid by the partnership. As can be seen in the above example, a PFLP can be especially attractive if Mr. Williams has already utilized his current lifetime gift exemption of $1,000,000. In this instance, a PFLP may be much more attractive than an IDGT in order to avoid paying gift tax upon formation. It may also be more attractive than a GRAT in allowing the children to leverage their generation skipping transfer tax planning, since a GST exemption may not be allocated to a GRAT until the end of the GRAT's term. Mr. Williams might also want to consider selling his preferred interest for a promissory note taking advantage of the interest rate arbitrage between the preferred rate and the current AFR. This could create excess funds which could then be used to fund life insurance premiums. PFLP could also be beneficial where a family has already implemented other strategies and now would like to leverage the assets held in trusts, partnerships, or outright by younger family members. By combining these family assets, additional value may be transferred to younger generations. This is especially true in light of current market and business valuations. In the example above, it may be possible to have a preferred rate of 5%-7% (perhaps lower) depending on the structure of the preferred interest units. Structure of the Preferred Interest Units As provided in Rev. Rul. 83-120, yield, dividend coverage, and liquidation preference will be the main considerations in determining the value of the preferred interest units. In order to reduce the preferred rate of return (or increase the preferred rate as the case may be), the following items should be considered in drafting the partnership agreement: • Common unit coverage – As discussed above, a minimum 90%/10% ratio will be necessary; however, in order to reduce the preferred rate, additional common investments could be made. Conversely, the lower common investment may produce significant discounts on any transfer of the common units. • In-kind distributions – The preferred rate may be lowered by granting the general partner the ability to make in-kind distributions to the preferred holder. By allowing additional sources for the payout of the preferred amounts, the preferred holder will have improved coverage. • Right of withdrawal – The preferred partner could be granted the ability to withdraw from the partnership by providing written notice. Again, this right lowers the risk of the investment and therefore the preferred rate. • Interest on unpaid preferred return – Although this may be counter productive to estate planning, requiring interest on the accrued but unpaid preferred return may decrease the necessary preferred rate. • Term – Perhaps a shorter term partnership agreement could lower the risk and therefore the market rate. • Prepayments/Redemptions – The general partner could be granted the authority to prepay the preferred amounts and pay the preferred capital before making distributions to the common units. • Control features – By granting the preferred partner additional control, the risk of the investment can be lowered and therefore reduce the necessary preferred rate. In structuring the preferred interest, it is also important to consider the implications of the qualified payment right being considered a guaranteed payment under Section 707(c). From an income tax (and potentially self-employment tax) standpoint, it is generally undesirable for the payment to be treated as a guaranteed payment. Income and Estate Tax Planning With a PFLP, the income of the partnership will flow-through and be taxed to the various partners. Control can be maintained through ownership of the general partner interests. In circumstances where the growth of the partnership consists primarily of taxable income and not appreciation, the combination of a PFLP and an IDGT to hold the common interests can result in several benefits; namely: (1) “freezing” the taxable estate through the issuance of the preferred interests; and (2) further reducing the taxable estate since the IDGT is taxed as a grantor trust allowing the preferred interest holders to pay the tax liability on behalf of the holders of the common units. As with the formation of any partnership, a practitioner will need to consider the investment company rules. Expanding upon the above example of Mr. Williams and his two children, Table I illustrates the financial benefits of a PFLP assuming that the preferred payout is deferred for four years to maximize the compounding. If the PFLP generates a 10% overall return and pays out a 8% preferred return, the children's initial capital contribution of $2,000,000 in the GST trusts would be valued at $36,267,176 after 20 years, less the cumulative preferred dividend payable of $2,560,000 ($640,000 x 4 years) which is still owed to Mr. Williams, assuming no life insurance is in place. These returns can be enhanced significantly if life insurance is utilized. Downside Protection With a PFLP, the partnership can be liquidated if the underlying assets do not appreciate as anticipated. Also, upon the death of a preferred partner, his estate will receive the benefits of a “step-up” in tax basis in the partnership's assets if a Section 754 election is made. Alternative Strategies The table below compares the benefits of a PFLP to a GRAT and an IDGT: Comparing Various Estate Tax Strategies
Conclusion There are many advantages of a PFLP. These include: (1) potential income tax savings; (2) the estate value is “frozen” by the amount of the capital contribution plus the preferred payout; (3) wealthy taxpayers can maintain a level of control; (4) there is flexibility since the preferred interests can be sold or redeemed; (5) cash flow can be enhanced by deferring the “dividend” payment for up to 4 years; (6) there is a level of asset protection; and (7) the common units can be sold or transferred at discounted values. There are also disadvantages to using a PFLP. These include: (1) a certain level of complexity; (2) an investment is required for the common units, and these amounts bear additional risk; (3) there are cumulative cash flow requirements; (4) there is a higher rate of “interest” than with a GRAT or an IDGT; and (5) it may require the use of the children's gift and GST exemptions if seeking additional leverage from the structure. The benefits of a PFLP can be quite significant, but this strategy is not for everyone. To properly form a PFLP, be sure to work with a team that includes an experienced estate tax attorney and a knowledgeable CPA. Gifting
a Remainder Interest in a Personal Residence The dramatic drop in interest rates provides taxpayers
with some rare planning opportunities. For instance, the IRS just
announced in Rev. Rul. 2008-43 that the August Section 7520 applicable
federal rate (AFR) is 4.2%. Last year the August rate was 6.2%. The
interest rates have not been this low since late 2002 and they bottomed
out in July 2003 at 3.0%! Rollover
Right Yes, your elderly clients can still make a charitable rollover from and IRA. But in a year when minimum distributions have been suspended, should they? Despite the downturn, many of your retired clients may
want to make charitable donations. The so-called IRA charitable rollover
has been called a no-brainer for seniors' philanthropy by Natalie
Choate, an attorney with Nutter McClennen & Fish in Boston. Using IFRS
to Drive Business Development Opportunities for Small and Midsize
Firms Inside the growing footprint of IFRS lies something many small and midsize CPA firms may be overlooking — rich opportunities for business development. IFRS-related work in the United States has largely been the domain of major accounting firms thus far. While national firms are filling many of the needs, there’s a large space that small and midsize firms can occupy given the right positioning, knowledge and resources. To carve out an international niche, firms must be realistic about the challenges. Reaching critical mass as you grow your IFRS client base will take time. Building IFRS bench strength inside your firm will likewise take a commitment. The effort may mean an outflow of cash for the first couple of years. Yet for small and regional firms willing to put in the work, developing that kind of niche can ultimately drive profit. FILLING A VOID Likewise, U.S.-based companies with foreign subsidiaries will also benefit by having all entities report under one common international accounting system, saving considerable time, effort and cost related to managing operations and reporting consolidated results. The first wave of transition is happening now. With the AICPA’s recognition in 2008 of the International Accounting Standards Board (IASB) as an accounting standards setter, the door is open for U.S. private companies to adopt IFRS. The SEC’s proposal to transition issuers to IFRS beginning in 2014 (see sidebar, “IFRS in the U.S.: The Road Ahead,” for more on what the SEC has proposed) will take significant resources and manpower. Many companies will tap external sources to bolster their staffs to make the shift. Businesses will need expertise and/or capacity to: • Make a preliminary assessment of the impact
of adopting IFRS, including identifying areas that appear to be most
sensitive to conversion. Sean Lager, CPA, an audit partner of the Atlanta firm Frazier Deeter LLC, says his firm, which employs about 100 CPAs, has been working for the past five years with companies that report under IFRS. “Based on our experiences, there is a huge void in our marketplace of IFRS knowledge,” Lager says. “There is already a demand in the U.S. for IFRS knowledge (due to 100-plus jurisdictions moving to IFRS), and once the SEC requires IFRS for U.S. issuers, there is going to be a major opportunity for all firms to assist in the transition to IFRS. We have already positioned ourselves to take advantage of that void.” Case Study: The Learning Curve As we began to dig deeper into the international standards, we identified subtleties that needed to be considered, such as inventory valuation and deferred taxes. Our initial assessment of inventory concluded that there would be no difference since the client did not value its inventory under the last-in, first-out inventory valuation method (IFRS does not permit the use of LIFO). However, the client held some older inventory with a market value less than cost. In accordance with U.S. GAAP, those items were valued at market. IFRS states this inventory should be valued at the lower of cost or net realizable value (that is, market value less selling costs). This slight difference in wording resulted in a significant difference in reporting value. We had a similar experience with deferred taxes. The two standards on income taxes, IAS 12, Income Taxes, and FASB Statement no. 109, Accounting for Income Taxes, appear to be very similar. But as we read more closely, we found presentation issues not initially considered. For example, the client had deferred tax assets that were not expected to be fully recoverable. Under U.S. GAAP, the gross amount is recorded and offset with a valuation allowance. In accordance with IAS 12, deferred tax assets are presented at the net probable amount to be realized, and deferred taxes are shown as long term as opposed to U.S. GAAP’s requirement to classify based on the nature of the related asset or liability. ACQUIRING THE SKILLS Outside training is invaluable, and small and midsize firms must be willing to invest time and money in educating staff if they hope to capture IFRS work. Sharing knowledge across the firm (and across multiple offices for firms with more than one location) through meetings and training helps deepen the bench. Many smaller firms also turn to associations of firms for advice and to pull in expertise or personnel needed to fill gaps. Our firm, for example, serves as the concurring reviewer for IFRS for an engagement in Hawaii as a result of our association in CPAmerica. We perform the technical/concurring review of the financial statements that are prepared in accordance with IFRS. We are a supplement to their bench strength. We also use white paper development to expand IFRS expertise on our staff. At our monthly international niche meetings, we assign a team member an area of international standards to study and ask him or her to compose a white paper on the topic. For example, a team member assigned to study inventory would research IAS 2, Inventories, by reading the summary and the standard and writing the white paper, which is then presented to the group and posted on our Web site. The white papers touch on the differences between the international standard and U.S. GAAP, but only at the close of the paper. Placing the differences on the back end helps reinforce the necessary change in mind-set and helps take CPAs beyond the differences. As a result of this process, our team members develop expertise on certain sections of international standards rather than trying to learn everything all at once. Another tactic is for auditors in an IFRS engagement to review the disclosure checklist as part of the audit planning. The checklist helps auditors identify specific elements that must be addressed during the audit process. Some Opportunities for IFRS Education SHIFTING BUSINESS DEVELOPMENT GEARS Our firm sponsors the German-American Business Circle to support the economic development infrastructure needed to attract and retain German companies in Pittsburgh. Members of the firm’s international group are also involved with the regional British American Business Council. Such groups are often a source of member databases that firms can mine for new business opportunities. Our firm regularly divides target lists up among the international group members, who research the financial metrics and geographic location of both the parent and subsidiary. For small and midsize accounting firms, the best opportunities may be with subsidiaries whose parents are not overly large, are family owned or have a limited number of investors. We target subsidiaries whose parent company has revenue ranging from $500 million to $5 billion, where it’s easier for the parent to envision us as the accounting firm and for us to forge relationships with management at both the parent and subsidiary. Market research can also include looking at the attorneys or bankers working with the foreign-owned companies in your region. Existing relationships with those contacts can help open doors for small and midsize firms. A willingness to initially take on startup or small foreign subsidiaries as clients can help deepen a firm’s IFRS practice. One of our earliest foreign clients began in the 1970s as one man with a suitcase full of product. He was charged with establishing a U.S. company to sell items manufactured by the European parent. As with many startup entities, our early services consisted of simple accounting and business advice. As the company matured and prospered, our services also evolved to include consulting on complex merger/acquisition and tax matters. Today, that company has blossomed into a manufacturer/distribution company with more than $100 million in annual revenue and subsidiaries in Mexico and Canada. Patience often pays off in growing an international practice. CONCLUSION With Options
Underwater, The Reprice Is Right Having endured a relentlessly steep decline in share prices, some companies have elected to reprice their employee stock options. So far this year, Google Inc. (GOOG) and Starbucks (SBUX) are the highest profile corporations planning to reprice these options, but they may herald a wave of more companies taking similar measures. Generally speaking, stock options permit the holder to buy shares at a future date for a specific price -- usually the price on the day of the grant. This is known as the "strike price." Upon the vesting of such options, the holder can make a handsome profit -- but, of course, only if the share price has risen above the strike price. When the market is mired in prolonged weakness, stock options frequently go "underwater" -- that is, the strike price exceeds the market price -- and the options become virtually worthless. This turns into a crucial issue for employees whose compensation is directly tied to their company's share price performance. Given that Google shares have plunged 55.3% from all-time closing high in November 2007, and Starbucks shares have plummeted 76.9% from all-time peaks in May 2006, a lot of these companies' workers might be tempted to seek employment elsewhere. To placate employees and enhance retention, a company might reprice existing options to a value that is at or below the current stock price, or it might seek to exchange the old options for new ones. Indeed, option exchanges/repricings can take a wide variety of forms. In Google's case, the company is proposing to exchange "underwater" options on a one-to-one basis with options tied to the company's closing stock price as of March 2. "In 2008, we tracked a total of 50 examples of publicly-traded U.S. companies enacting option exchanges or repricings," said Alexander Cwirko-Godycki, research manager at Equilar Inc., an information services firm specializing in executive compensation. Most companies in 2008 that repriced options were small-cap names, principally in technology and health care. Two of the more prominent larger companies that repriced were Maxim Integrated Products (MXIM) and MGM Mirage (MGM). "So far, in January 2009, there are already 18 active or proposed exchanges and repricings -- half from the tech sector," Cwirko-Godycki noted. "The pace of announcements is really accelerating as we head towards the season of annual shareholder meetings." Another reason for option repricing would be to reduce "overhang" rates. "Overhang is a measure of how outstanding equity options could potentially dilute shareholder ownership" said Cwirko-Godycki. "By exchanging options, a company can cancel a large number of "underwater options" and usually grant fewer shares as a replacement -- this is especially true if options are traded-in for restricted stock. This may improve retention and eliminate share grants that might otherwise be wasted. Also, this cuts down potential dilution which is good for all shareholders." But not all shareholders are happy with option repricings, particularly outside stockholders who don't work for the company and whose options trade on public exchanges. It's important to remember that there is a vast difference between employee stock options and market options acquired by outside stockholders. Employee options represent compensation, while market options represent an investment decision. "Companies all argue that stock options are compensation-based and they need to reprice to keep their talent on board," said Roger Lusby, a partner with Atlanta-based accounting firm Frazier & Deeter. "But as a shareholder, I do not favor repricing since it is dilutive and it becomes a "heads you win; tails I lose" game." The biggest complaint from outside stockholders is that in their minds a repricing creates a disconnect between pay and performance, Cwirko-Godycki said. "Employees get a "do-over," while other shareholders are stuck with losses and have no recourse," he said. In addition, it has been argued that repricing of options hurts a company's future earnings on a per share basis since more stock would have to be issued upon exercise of the options. "There is an accounting practice called "Variable Accounting Treatment" in which a company's balance sheet may be hurt by option repricing," said Brian Overby, senior options analyst at TradeKing.com. "Companies have to sometimes walk a tightrope under this scenario -- would they rather take a possible reduction to future earnings caused by the variable accounting; or do they dread seeing their top executives flee the company?" While we may indeed see a wave of option repricings this year, Cwirko-Godycki doesn't think it will match the scenario from 2001-02, amidst the tech bubble implosion. "We might see 100 or more examples of option exchanges this year," he said. "But I don't expect we will reach 200 to 400 examples like we did in 2001 and 2002." This is because most companies, especially mature tech firms, are much more diverse in the way they grant equity, he noted. "Most companies don't just grant options anymore, they also award restricted stock or "performance shares,'" Cwirko-Godycki said. "Thus, companies may not be as hard-pressed to reprice options. This is especially true for companies outside of the technology arena." Moreover, it's harder to get repricing plans approved
now because some companies need to obtain shareholder approval, in
addition to board approval. Seth McDaniel, another partner with Frazier & Deeter, says that "given the job cuts in the current economy, many companies don't have a strong motivation to reprice options. Essentially, some employees, particularly at tech companies who may be unhappy with the value of their shareholdings, don't really have anywhere to go." However, Overby expects to see the number of option repricings this year exceed the number from the tech bubble period. "Back in 2001 and 2002, share weakness was mostly concentrated in the tech sector, which had the most option repricings," he said. "But the current economy downturn has spared no one. I think stocks from across all sectors will be compelled to lower their option exercise price." Accounting
and Auditing in the Current Economic Environment The ongoing financial crisis and its overall impact to our economy are unprecedented. Recent market events in December 2008 and January 2009 indicate further bad news may still be ahead of us, most notably: • December 1 - The US recession is officially
declared by the National Bureau of Economic Research, a leading panel
including economists from Stanford, Harvard and MIT. The committee
concluded that the US economy started to contract in December 2007. Given these recent events and the perception that the situation is deteriorating, the popular Chinese proverb “May you live in interesting times” appears to have come to fruition. For accountants and auditors, these events will have significant ramifications on the audits of financial statements and internal control over financial reporting. In light of these events, the American Institute of CPAs (“AICPA”) recently issued a report titled “Current Economic Crisis: Accounting and Auditing Considerations 2009” which focuses on legal and regulatory actions taken to curtail the crisis as well as relevant accounting and auditing considerations. The following provides some of the more significant elements of the AICPA audit risk alert. Economic, Legislative and Regulatory Developments Accounting Issues and Developments • Fair value, including fair value measurements
in illiquid markets, FASB Statement No. 157 has received a great deal of attention and some have argued it exacerbated the economic situation due to price disconnects (e.g., bid-ask spreads) present in today’s market. Proponents of the standard claim it merely exposed the problem, but did not create the problem. However, all practitioners tend to agree additional guidance is required to properly apply this standard, primarily in illiquid markets. As a result, in October 2008, the FASB issued FSP 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active. In late December 2008, the SEC released to Congress its mandated report on fair value accounting standards. The report recommends against the suspension of fair value accounting standards, but it does recommend improvements to existing practice, including reconsidering the accounting for impairments and additional guidance for determining fair value in inactive markets. The report also stated that fair value accounting did not appear to play a significant role in the bank failures of 2008. Another important topic receiving increased attention in today’s market is determining whether an investment is other-than-temporarily impaired. FSP FAS 115-1 and FAS 124-1, The Meaning of Other-Than-Temporary and Its Application to Certain Investments, addresses the determination of when an investment is considered impaired, whether the impairment is other-than-temporary, and the measurement of the impairment loss. Given the current economic situation, practitioners should also be alert for other types of asset impairments, including long-lived assets, goodwill, and deferred tax assets and the related accounting literature. The AICPA has also issued a Technical Practice Aid (TPA TIS Section 1100.15) that addresses liquidity restrictions that may be imposed on money market or other short-term investment funds. The TPA discusses considerations when an entity is restricted from withdrawing its balance in one of these funds, including: (i) whether the assets subject to restriction qualify as cash equivalents or current assets, (ii) whether disclosures about risks and uncertainties should be made, and (iii) whether the restrictions trigger debt covenant violations or call into question an entity’s ability to continue as a going concern. Audit and Attestation Issues and Developments Due to the current crisis, audit risks that were previously identified may become more significant or new risks may exist. These risks and uncertainties may lead to questions about an entity’s valuation, impairment or recoverability of assets and the completeness or valuation of liabilities. However, the most controversial area of auditing this year-end will be fair value accounting. As a result, it is very important for auditors to have adequate training on fair value accounting as we enter busy season, with particular emphasis on the significant estimates and assumptions, the choice and complexity of valuation techniques and models, and the extent of disclosure in the financial statements. For additional information on this AICPA audit risk
alert, please go to the AICPA website at: The Privacy
Argument INTRODUCTION Along with this change in attitudes towards privacy, there is an exponential increase in the availability of personal information. This is mainly due to the advances in storage capability, the proliferation of e-commerce and indexing innovations that make data availability almost instantaneous. This evolution of technology and desire to share personal information raises new questions, such as “what are the privacy expectations of the consumers?” and “what are the responsibilities of businesses and administrators to protect (and react) to personal information?” Privacy is a nascent concept for many businesses and industries; however, there are several industries where privacy risks have been catapulted to the foreground. Higher education is one of those industries. Soon after the Virginia Tech tragedy in April 2007, many eyes turned to the complicated privacy laws that impeded the sharing of information between education, law enforcement and healthcare. As often happens in the wake of a tragedy, rules and regulations were examined and revisions proposed to address a situation that until that time was incomprehensible. As an auditor, it is necessary to understand the risks that create significant exposure to the organization and the expectations of administrators to mitigate those risks. In this article, we will provide a background of the evolving privacy requirements as risks to institutions of higher education and a framework for performing a privacy audit. PRIVACY AND DATA PROTECTION KEY REGULATIONS FERPA • Providing students over the age of 18 access
to inspect their educational records As a note, these protections are largely granted to parents when the student is under the age of 18 and the protections relate to educational records and specifically exclude health records that might be held by the institution. (Paraphrased from US Department of Education Web site) HIPAA • Documented privacy policies and procedures FERPA and HIPAA are only two, albeit the largest, examples of an amalgamation of complicated state and federal laws designed to protect consumers’ information. It is this complexity that has been deemed by many as one of the major obstacles in preventing the Virginia Tech tragedy. As a result, new legislation was proposed in early 2008 to amend FERPA and to simplify some of these unnecessary complexities. The proposed amendments would give more latitude to educational administrators and allow them to share personally identifiable information without the consent of the student when certain circumstances arise. The updated language also clarifies FERPA rules of disclosure when required under the US Patriot Act and the Campus Sex Crimes Prevention Act. Considering the complexity of privacy laws and the inability of many to keep their personal information secure, it is becoming a greater challenge for institutions to manage their risk policies and for auditors to evaluate and report on the design and implementation of those policies. For many audit departments, privacy has become one of the top compliance and reputational risks in their organizations. PRIVACY IN ACADEMIC INSTITUTIONS MECHANICS OF A PRIVACY AUDIT Identify Privacy Risks One of the most effective and thorough means to identifying these risks is to gain an understanding of how data flows through the organization. Each data access point can be considered a potential risk area. For each data access point: • Understand what protection mechanisms are in
place and who is responsible for implementing them Evaluate Existing Policies and Procedures Test Key Controls • Access controls that are in place to protect
personal information from unauthorized modification or use, damage
and loss Assist Management with the Resolution of Findings
and Issues • Limit access to those who require it Identified risks and solutions should be used by the organization to remediate gaps in business processes and procedures to better protect sensitive data, comply with laws governing data security, develop effective compliance strategies and put best practices into action. SUMMARY Frazier & Deeter
Named #1 Best Accounting Firms to Work for in the U.S. TO DOWNLOAD A PDF OF THIS ARTICLE CLICK HERE. What makes an accounting firm a great employer? Is it exceptional benefits? Flex time? Opportunities for advancement? As you might expect, the tactics that make for success vary from firm to firm; however, one value underlies them all - a genuine "people-first" attitude. Accounting Today set out to find the firms that excel at keeping their workforce on board and happy through our first Best Firms to Work For survey. And we have our winners. Sixty accounting firms have been honored in this inaugural program, created in conjunction with workplace consultancy Best Companies Group. The winning firms were divided into three categories for ranking: small firms with between 15 and 24 employees, midsized firms with 25 and 249 employees, and large firms with more than 250 employees. Mark Bailey & Co. in Reno, Nev., Frazier & Deeter LLC in Atlanta, and Kaufman, Rossin & Co. in Miami garnered the first-place ranking in the small, midsized and large categories, respectively. In all, five small firms, 40 midsized firms and 15 large firms were honored as Best Firms to Work For. They will be recognized at an awards ceremony in May. "We were very excited when the results came in," said Susan Springer, director of workplace assessments for Best Companies Group, which conducted the analysis and rankings. "The data was a very strong and competitive list. ... It's great to see that there's stiff competition, which means overall, accounting companies get it." (For details on the process, see "Choosing the Best," at left.) MARK BAILEY & CO. It was the "trashing" of the timesheet at Mark Bailey & Co. approximately three years ago that started the firm's cultural odyssey to a more satisfying and successful workplace environment. The defining moment came when the firm's managing partner, Mark Bailey, was going through a divorce and found himself sifting through bills from his attorneys that documented every phone call, according to the firm's marketing director, Michelle Turri. At that point, Bailey and his firm reflected on the organization's value system and how charging an hourly fee was archaic. Instead, the firm introduced a fixed fee for each proposal, which decreased the administrative time of tracking costs - and the results were immediate. "The biggest thing is [seen] in the employees - just happiness and staff retention," Turri said. "Our firm revenue has more than doubled, our clients have doubled, and the firm size has doubled, all in the time of implementing this." Aside from the new fee structure, the firm started asking employees what jobs they wanted to work on, and from there assigned them tasks to get the job done by an allotted deadline. "The staff is pretty much free to set the hours that they need to be in the office or work on that engagement. We're not there to keep track of the time," Turri said. "We trust our employees to get the job done. That really frees them up, and they feel like they are a valuable resource to the firm." A retired university professor was also hired in 2007 to develop a mentoring program and focus on firm growth. With both the mountains and an ample urban life available, the firm takes advantage of Nevada's amenities, treating staff members to rafting trips, barbecues, annual holiday parties and a plethora of outside staff functions through its social committee. "There's a misconception about small accounting firms that you're going to be bored, you're going to work on small clients, you are going to be doing tedious things, and that's not the case at all," Turri said. "They're experiencing a wide variety of clients. They still get all of their continuing education. They are working on a flexible work schedule and people are getting paid for their overtime. I think they feel respected." FRAZIER & DEETER With 180 employees, including those in its wealth-advisory firm, Frazier & Deeter attributes its consistent, organic, seven-year, double-digit growth to a combination of being able to add talent and services that benefit clients, its geographic location and a strong marketplace. "I just think we have a culture where the men and women have bought into our strategic plan," said managing partner David Deeter. "We've laid out what we're trying to accomplish as a firm at quarterly meetings, and we give updates on how the firm is progressing." Deeter can rattle off a variety of reasons why his firm is a great place to work: fun activities, community involvement, reasonable targets for charge hours, sports teams, and social hours. The firm has had less than 5 percent turnover in the last three years, revealed marketing director Erinn Keserica. She said that coaching, training, community, and social and entrepreneurial initiatives make a stronger impact collectively than as individual strategies. The firm also annually hosts the Our Clients' Expectations And Needs, or OCEAN, Awards, where peers and partners can nominate each other for actions done to improve the quality of client work and internal support. "It's amazing the exposure our firm has received over the last several years for being well-managed and well-operated," Keserica said. "It's really opened the eyes of potential candidates. They come straight here and want to be part of the team, which is a compliment." The firm's geography helps, too. Deeter said that Atlanta is among the best places for young people to start a career - and to finish one, as well. "I think we've always had bias towards growth and entrepreneurship and career opportunities," Deeter said. He added that the firm recently created an internal director of learning, is formalizing a teaching university within the firm, and plans to expand beyond Atlanta to other Georgia locations, as well as neighboring states. "We've taken risks in opening divisions. We've taken risks in bringing people into the firm. We're trying different things all the time. Some work, some don't." KAUFMAN, ROSSIN & CO. "One of the things I felt is a real hardship on a whole segment of our group is health insurance costs for dependents and for children," said Jim Kaufman, managing partner at Kaufman, Rossin & Co. in Miami. "We actually devised a supplemental system with an HMO where we provided children coverage for $150 month and families for $250 for our employees. There is nobody in our business now, in this market, that even comes close to offering that kind of benefit. To me, that was causing the most pain - especially on staff levels." That program was initiated approximately two years ago. However, that's not the only reason the firm's employees stay put. On the firm's Web site are employee "spotlights" or "A day in the life," as well as a video about the benefits of working in southern Florida at their firm. With 291 employees and three offices in the area, the firm offers book clubs, wine parties, and an on-premise spa and gym, as well as "rainmaker boot camps." "I think we've always had a people-first culture," Kaufman said of his firm, which has grown to its current size without any mergers. "We're 46 years in business. This has been inculcated since there were just a few employees during the first few years, and that value system I think has permeated the culture ever since." Approximately five years ago, the firm created Kaufman Rossin University, which offers a curriculum focusing on professional, technical and lifestyle skills. It has also instituted a leadership program to promote innovation and growth. "It really gives traction to the message that we want people to grow," Kaufman said, adding that the firm also has a mentoring program managed by a talent development director, and that roughly 150 of the firm's employees are in their 20s or 30s. Kaufman describes the firm as like family. "One of the comments that was made to me by one of our new employees, who came on from another accounting firm, at one of our social events, was that the incredible thing is you can't really tell who the partners are, who the staff or admin are because there is so much social interaction," he recalled with a laugh. "Apparently in this old firm, all the partners clustered together and talked to each other and there wasn't that kind of congenial tone like we have here." As for what's next for the firm, Kaufman said he's trying to keep everybody employed and challenged. "That's a good project in this day and age," he said. "Our big focus is keeping everything in place, and we're not retrenching when it comes to employee benefits." CHOOSING THE BEST Identifying and recognizing the best employers in accounting was a joint effort of the publishers of Accounting Today and Best Companies Group. The program was open to accounting firms with at least 15 employees working in the U.S. Participating firms submitted an Employer Benefits and Policies Questionnaire to disclose company policies, practices and demographics, which made up one quarter of the firm's score. Then staff members completed a confidential Employee Engagement and Satisfaction Survey, to evaluate the employees' workplace experience and company culture, which accounted for the remaining three quarters of each firm's score. The results were then analyzed and categorized in eight areas: leadership and planning, corporate culture and communications, role satisfaction, work environment, relationship with supervisor, training and development, pay and benefits, and overall engagement. The registration process, surveys and data evaluation were managed by Best Companies Group, which manages 32 similar programs across the country and in Canada. Georgia State University
Panther Club Spotlight on David Deeter From his 19th floor office in the Bank of America Plaza, David Deeter recalls how far he's come since his humble beginnings in Mableton, Ga . He insists that he's “still just a southern guy.” “I was the first person in my family to go to college,” he said. “My dad, Derwin was an encourager and a motivator. He always pushed me and believed that I could succeed. He was a Christian man who taught me Christian values.” Deeter proudly displays a letter written by one of his father's customers that commends Derwin's performance as a Western Union delivery man as ‘leaving the impression of being happy to serve.' “That's quite a compliment, and a great motto for just about any business.” Deeter graduated from South Cobb High School , and went on to earn both a bachelor's and a master's from Georgia State University . “I played soccer at Georgia State for one quarter, under Coach Stoney Burgess,” Deeter explained. “I thought about leaving school once, but Coach Burgess convinced me to stay.” He chose to major in accounting because he “heard that accountants made good money and worked with business people,” and he knew that accounting was “the language of business.” Deeter graduated from GSU at age 22, finishing both of his degrees (MBA and BBA) in only four and a half years. His typical day consisted of going to classes from 8 a.m. till noon, then working from 4 till 10 p.m. at Austell Boxboard, weighing in trucks. The accounting firm of Main Hurdman, a predecessor to KPMG, hired Deeter after graduation. It was there that he met his current business partner, Jim Frazier. “Jim and I started Frazier & Deeter in July of 1981. It was just the two of us and a secretary.” The company now employees over 180 people and is recognized by Accounting Today as one of the top 100 accounting firms in the country. Among his many outside interests, Deeter is a staunch supporter of Georgia State Athletics. “I remain involved with Georgia State because of my love of sports and my love for the school. Athletics is a great way to market the entire school, not to mention how it improves the quality of education and how it adds to life experience.” Deeter is committed to supporting Georgia State Football, and encourages other alumni to do the same. “We have to raise a lot of money for GSU football. The addition of this sport has re-energized my love of sports.” As he recounts the people who have inspired him, Deeter credits his father as being one of the most influential people in his life. “My father definitely had a big impact on my life. My friendships with Jim Frazier and with Dr. Jim Lyon have also had a great effect on me, also. Most importantly, his wife, Cantey, has been a great supporter and partner. I try to read the Bible every day, and I try to mentor my children to instill in them the same values that my dad instilled in me.” Deeter and his wife Cantey, whom he met on a blind date, have four children—Nathan, Katie, Emily and Camilla . When he's not working or attending a Panther athletics event, Deeter enjoys the idea of an integrated life: spending time at his lake house, playing golf, attending church activities and following college sports. He even admits to posting on a college sports message board or two. Not to worry, David, we won't include your online nickname!
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