From Atlanta to Seattle, some 700 CPAs took the first accredited-in-business-valuation examination on November 15, 1997. With the test results now in, CPAs from firms of all sizes are proudly putting "ABV" after their names.

"It was a difficult exam. In fact, it reminded me of the Uniform CPA Examination," said Richard A. Pollack, CPA, ABV. He's had years of business valuation experience and already had become an accredited senior appraiser through the American Society of Appraisers and a certified business appraiser through the Institute of Business Appraisers. "Nevertheless, I don't think I could have walked into the test center cold and passed. I had to sit down and study beforehand."

Pollack will continue to apply his appraisal skills while advertising his new designation. He's one of seven partners in the Miami firm of Berkowitz Dick Pollack & Brant, which has a staff of 60. Pollack performs valuations for estate planning purposes, mergers, acquisitions, litigation and divorce engagements. Partners in shareholder agreements need valuations for buy-sell purposes, Pollack said, and corporations changing from C to S status also need valuations for tax reasons. "Many people think they'll sell their business someday or go public—they just want to know what it's worth." Pollack, who also has a background in auditing and consulting, finds advising a business about what it takes to build value and helping management set value goals very satisfying.

Pollack praised the AICPA for creating the ABV designation. "The AICPA can now take a leading role in providing a standard of excellence in this important area of our profession."

Market your firm, market yourself
Another CPA who passed the ABV exam is Edward J. Dupke, chairman of the MCS business valuations and appraisals subcommittee and a member of the AICPA board of directors. "In today's competitive market, CPAs gain an advantage through the ABV accreditation," he said. "Judges, attorneys and end users of valuation services will recognize that, when combined with the CPA designation, ABV reflects the practitioner's knowledge and experience to provide the highest level of business valuation services competently and professionally. The accreditation is important not only for public practitioners who specialize in this area but also for CPAs in industry, government and education who can combine this credential with their individual talents as they work for the benefit of their employers."

The next exam will be offered November 2, 1998. More information on the exam, requirements and an ABV certificate of educational achievement course are available on the Web at www.aicpa.org/members/div/mcs/abv.htm . Members can also call the ABV Helpline at 212-596-6254, fax questions to 212-596-6268 or e-mail questions to Madelaine Feldman, ABV program coordinator, at Mfeldman@aicpa.org .

Johan Piet, FEE chairman, said there was a widely held view that IASs "did not provide adequate guidance" on environmental issues. "We have encouraged the IASC to take a lead in demonstrating that its standards are sufficiently comprehensive," said Piet.

The FEE recommendations include the following:

• IAS no. 1 on disclosure of accounting policies should require the separate disclosure of material environmental costs and liabilities.
  
  
• When environmental costs are disclosed separately, the accounting policies should state what the costs represent and the accounting method used.
  
  
• The IASC should establish an official definition of environmental costs and liabilities.
  
  
• IAS no. 16 needs to clarify all of the criteria for capitalizing environmental property, plant and equipment expenses.
  
  
• The proposed IAS standard on impairment of assets should address environmental factors.

The IASC is not expected to address reporting for environmental issues until it has completed its set of core IASs later this year.

A copy of the memorandum is available by calling the FEE in Brussels at 32-2-285-40-85.

IAS no. 19, Employee Benefits , requires companies to show clearly how employee benefits affect financial position and performance. The standard improves disclosures for defined benefit and other postemployment plans by requiring, among other things, an analysis of the costs of such benefits in the balance sheet and income statement, a reconciliation of changes in balance sheet amounts and a summary of main actuarial assumptions. Liabilities and costs of postemployment benefits must reflect market values.

IAS no. 19 also includes a requirement that companies determine the present value of defined benefit obligations and the fair value of any plan asset on a regular basis to avoid large discrepancies between the financial statement amounts and the amounts determined at the balance sheet date. Companies also are required to use defined benefit accounting for multiemployer plans that are defined benefit plans.

The standard takes effect on January 1, 1999; however, the IASC encourages companies to apply it earlier. Copies of IAS no. 19 are available for $25 by calling the IASC at 44-171-427-5927, ordering by e-mail at www.iasc.org.uk.

The IASC encourages companies to issue more than one financial statement annually. For companies that choose to issue semiannual or quarterly reports, the standard defines the minimum content as including a condensed balance sheet, income and cash flow statements, changes in equity and selected explanatory notes. IAS no. 34 does not specify which companies must publish such reports or how frequently.

The explanatory notes to an interim report should update the annual report, disclosing changes in accounting policies, estimates, outstanding debt or equity, dividends and segment revenue. The update should also include information about subsidiary disposals or purchases, long-term investments, restructurings, discontinuing operations and changes in contingent liabilities and assets.

Copies of IAS no. 34 are available for $25 by calling the IASC at 44-171-427-5927, ordering by e-mail at publications@iasc.org.uk or online at www.iasc.org.uk.

A survey of 3,915 companies reveals that more workers than ever are enrolling in some form of managed health care to meet their health care needs. This shift to managed care plans from traditional insurance plans has held down health care benefit costs to less than a 0.2% increase per year for employers. Here are some recent trends.

Starr spoke specifically about limited-scope audits, noting they existed only in ERISA audits. In some cases, plan administrators can instruct auditors not to audit certain assets held by banks and certain other regulated entities. In those situations, the administrator can request such institutions to certify that the assets and related information are accurate and complete. "On a certification I personally reviewed," testified Starr, "I saw the investment fair value information reported by the bank from one year to the next did not change. Clearly, in this instance, this was not correct, and the bank had to revise the plan's investment report because of an error."

She reassured bankers who feared auditors would be overly intrusive if ERISA required full-scope audits. "I have not heard from banks, insurance companies, and so forth, that currently are trustees of plans with full-scope audits that there are many auditors camped on their doorsteps."

What happens next?

After the testimony, Starr told the Journal , "The good news is the House scheduled the hearings; I think there's a sincere interest in resolution on Capitol Hill." Nevertheless, a hearing is not a bill, and she does not expect any real changes to occur in the near future.

In a much anticipated move, the SEC has given authority to the Independence Standards Board (ISB) to develop independence standards for public companies and provide guidance on specific auditor independence issues.

According to Financial Reporting Release (FRR) no. 50, issued on February 18, the SEC will allow the ISB to provide auditor independence principles, standards, interpretations and practices, which means the commission no longer will promulgate separate independence rules. However, the SEC has not abdicated its own statutory responsibilities—it will provide oversight of the ISB and will take enforcement action when appropriate. According to the reporting release, the SEC's relationship with the ISB will be similar to the one it currently has with the FASB.

ISB members met for the first time in June 1997 and held two subsequent meetings before getting the green light from the commission. Without the reporting release, the ISB would not have the authority to issue independence standards. "The SEC's release—formally recognizing the role of the new ISB in the promulgation of standards by which to assess auditor independence—is an essential step in the rationalizing and systemization of those standards," said ISB chairman William T. Allen. "As such, we think it is an important step in the protection of investor interests and the efficiency of our capital markets."

Independence procedures
The ISB has an independence issues committee made up of nine representatives from the AICPA SEC practice section and a full-time staff located in the AICPA's New York City offices. All SECPS member firms should now contact the staff of the ISB—rather than that of the SEC—for guidance on auditor independence issues related to SEC registrants.

The following are unchanged:

• Auditors of private companies will comply with the AICPA professional ethics executive committee's independence rules.
  
  
• The state boards of accountancy and the AICPA ethics committee will undertake their own disciplinary actions regarding auditor independence.

Tackling big issues
Since the ISB's formation, four of the Big 6 accounting firms announced their intentions to merge, prompting serious concerns about competition, independence and higher audit fees. In fact, worldwide pressure forced two of the firms—KPMG Peat Marwick and Ernst & Young—to call off their proposed merger last February (see "When Bigger is Not Better," JofA, Apr.98, page 15). The board will likely take up the issue of competition and independence very soon.

The FRR said the SEC would closely monitor Big 6 mergers and would reconsider some of the accounting profession's self-regulatory programs, including the ISB, if the commission is not satisfied that the profession is safeguarding independence. The commission also will review the appropriateness of the board's operations and, after five years, will evaluate whether the board really serves the public interest and protects investors.

Meanwhile, the ISB will start the arduous work of amending present SEC rules and interpretations to best meet the needs of tomorrow's investors.

For more information on the board, visit its Web site at www.cpaindependence.org .

An adage says people don't plan to fail, they fail to plan. Are companies writing business plans? If so, do they include budgeting and financial information? The results below are based on a survey of 440 fast-growing product and service companies with $1 million to $50 million in revenues or sales.

Does It Work? Companies with written business plans increased their revenues 69% faster over the past five years than those without plans.

Innovative Educator

Joseph A. Silvoso, CPA, PhD, the AICPA's 1986 Outstanding Educator, died on February 5, 1998. He founded the School of Accountancy at the University of Missouri-Columbia in 1975—the first such school at a major state university-and thereafter was known as the "father of the schools of accountancy movement." Silvoso helped establish the Federation of Schools of Accountancy, which created the FSA Joseph A. Silvoso Faculty Award of Merit in his honor.

Silvoso also made time for volunteer work, serving on the AICPA board of directors and as president of the American Accounting Association. His many other honors include the Distinguished Service Award of the Missouri Society of CPAs and Beta Alpha Psi Accountant of the Year in 1977.

Before he began his academic career, Silvoso was national director of education at Touche Ross & Co. (now Deloitte & Touche).

A year ago, the AICPA's AcSEC published a draft of an SOP designed to provide authoritative guidance in an area where there had been none for most entities: start-up costs. That ED became SOP 98-5, Reporting on the Costs of Start-Up Activities , but AcSEC made some important changes along the way, as noted by AICPA Technical Manager Daniel J. Noll.

The SOP now covers the accounting for organization costs—the costs for activities related to organizing a new entity—and decrees they should be expensed as incurred, just like other start-up costs. The ED had specifically excluded them, "but in the end, AcSEC could not justify their exclusion," said Noll. AcSEC would have needed to clearly distinguish start-up from organization costs. By excluding organization costs, according to Noll, AcSEC had hoped to avoid generating extra bookkeeping work by creating temporary differences between tax returns for organization costs and book entries. Nevertheless, AcSEC realized that its definition of organization costs would have differed from the IRS's anyway, so a temporary difference was unavoidable even if these costs had been excluded.

The statement requires entities to expense previous capitalized costs in the year of adopting the SOP, as did the ED. However, the SOP now grants exemptions to certain investment companies, which will apply the SOP prospectively. "AcSEC noted that investors in certain funds would be unfairly harmed if previously capitalized costs were required to be expensed immediately, leading to an immediate decrease in net asset value per share," said Noll.

AcSEC also postponed the entire statement for one year, making it effective for financial statements for fiscal years beginning after December 15, 1998, rather than 1997. Noll said AcSEC wanted to give companies more time to consider implementation issues.

To order a copy of SOP 98-5, call the AICPA at 800-862-4272.

The report identifies several strategic initiatives the ASB will use to help form its agenda:

• Improve the value of the financial statements audit by using technology to provide real-time assurance, by addressing public expectations about assurance and by developing value-added services.
  
  
• Broaden the use of attestation standards by making them clearer and more flexible.
  
  
• Strengthen the board's leadership role in international standard setting by working with other bodies.
  
  
• Enhance the usefulness of the different types of guidance available to auditors (such as SASs and audit and accounting guides) and make them more accessible.

"Among other issues, we're concentrating on using attestation standards to do more," said Gerson. "We want auditors to stretch themselves."

Horizons for the Auditing Standards Board is available exclusively on AICPA Online at www.aicpa.org/members/div/auditstd/horizon/index.htm.

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Short takes, notes and items of interest

©1998 AICPA