Do you know the name John Wesley Cromwell Jr.? Do you know the specific businesses targeted recently for Paycheck Protection Program loan applications? This express version of the JofA podcast gives you more on those topics, along with details on an accounting alternative related to goodwill impairment that FASB is expected to issue soon.
Cromwell became a CPA 100 years ago, and his story as the first Black CPA is part of a year-long effort to honor, celebrate, and build upon the progress Black CPAs have made in shaping the accounting profession. You’ll also hear the voice of Lester McKeever, CPA, another pioneering Black accountant.
Also, catch up on what a White House statement means in the short term for PPP loan applications. And hear from Mike Cheng, CPA, a member of the AICPA Private Companies Practice Section Technical Issues Committee, on the significance of a recent FASB accounting alternative.
What you’ll learn from this episode:
- Why the first Black CPA, John Wesley Cromwell Jr., had to wait 15 years after graduation from Dartmouth to take the CPA Exam.
- The barriers that Lester McKeever, CPA, faced upon graduating from the University of Illinois.
- The Paycheck Protection Program’s new, targeted application window and what it means for smaller businesses.
- Key details of FASB’s alternative related to private-company and not-for-profit monitoring and evaluation of goodwill impairment triggering events.
Play the episode below or read the edited transcript:
To comment on this episode or to suggest an idea for another episode, contact Neil Amato, a JofA senior editor, at Neil.Amato@aicpa-cima.com.
Neil Amato: February is Black History Month, and today we’re starting with a history lesson but also a look ahead. This is Neil Amato with the Journal of Accountancy, and you’re going to learn a little bit today about the story of John Wesley Cromwell Jr.
It’s possible you’ve never heard of John Wesley Cromwell Jr., but in the CPA world, he’s a big deal.
In 1921, Cromwell became the first Black CPA. The obstacles he overcame, detailed in a recent Journal of Accountancy article, are numerous. We will link that article to this episode’s show notes, but here are a few examples.
Cromwell’s father had been a slave in Virginia, but Cromwell Sr. went on to law school and a career as an attorney, teacher, and activist. Cromwell Jr. went on to graduate Phi Beta Kappa from Dartmouth, but unlike his Ivy League counterparts, he found it tough to take the CPA exam — close to impossible. Most states required CPA exam candidates to work for a licensed CPA at an accounting firm. The firms he applied to generally said no to hiring him, reasoning that clients would not be comfortable having their work handled by a Black accountant.
Cromwell waited 15 years, during which time he taught math at Washington, D.C.’s Dunbar High School, before the state of New Hampshire dropped its experience requirement and allowed him to take the CPA exam.
Frank Ross is a CPA who cofounded the National Association of Black Accountants, and he said of Cromwell: “The more I learned about him, the more I wanted to work as hard as I could to accomplish what I can in this profession.”
The story of Cromwell wasn't a breakthrough for Black CPAs. Lester McKeever of Illinois tells a story of similar obstacles, except his experience was 30 years after Cromwell's CPA exam story.
Lester McKeever (in a 2018 video): “At the time of my graduation from the University of Illinois, the larger corporations and the then-Big Eight accounting firms did not hire African American professionals. I appreciated and respect the university’s placement office, which insisted that some firms at least give me the courtesy of an interview, despite the sad reality that they did not hire African American professionals.”
Amato: Frank Ross and other voices will be heard in upcoming podcast episodes that are part of the Black CPA Centennial, which is a yearlong effort to honor, celebrate and build upon the progress Black CPAs have made in shaping the accounting profession.
In corporate finance news, the application window for the current iteration of the Paycheck Protection Program, which has $284 billion available in loans to small businesses, is scheduled to close March 31. But there’s a new, targeted window for a subset of small businesses seeking relief from the impact of COVID-19.
A White House statement said that for a two-week period that began on Wednesday, Feb. 24, only businesses with fewer than 20 employees can apply for the loans. The statement detailed the removal on certain restrictions for applicants, such as allowing those who are delinquent on student loan debt to still apply. The targeted application window allows lenders to focus on the smallest borrowers.
Additionally, the White House statement said the administration would continue working to address PPP processing delays caused by anti-fraud validation checks. In the show notes for this episode, we’ll have article links with more details, or visit journalofaccountancy.com for more news.
In other news, the Financial Accounting Standards Board recently voted to provide private companies and not-for-profits with an alternative to the way they monitor and evaluate goodwill impairment triggering events. I had a conversation earlier this week that further explores that topic.
Joining me now is Mike Cheng, a CPA who is a former FASB staff member and now a member of the AICPA’s Private Companies Practice Section Technical Issues Committee. Mike, thanks for being here.
Mike Cheng: Thank you for having me.
Amato: Mike, first, in less technical terms, what does this move recently by FASB mean as it relates to goodwill triggering event alternatives.
Cheng: I guess in plain English, you probably have to step back and say, “What is goodwill, and when do you test it for impairment?” Goodwill’s a number that you kind of put on when you acquire a business, generally speaking, and what you’re supposed to do is assess it for impairment when something occurs, a triggering event is what GAAP calls it. And when that triggering event occurs, you’re supposed to assess whether the fair value of the reporting unit or the entity, if you’re a private company potentially, is below the fair value, so what you’ve got on your books is below the fair value. And if it is, then you have a goodwill impairment test.
The issue that the FASB is trying to resolve is when do you actually do that comparison, so when do you compare the carrying value of goodwill of the reporting unit or the entity to the fair value? And what they did in this recent standard is allow you to say, “Hey, if you report financial statements, and let’s say a triggering event occurred within that time period, go ahead and do it as of the end of that reporting period.” So, for example, you issue quarterly financial statements, and a triggering event occurred on Jan. 15, I think what the FASB is trying to do is say, “Don’t worry about doing it right on the 15th. If your quarter end is March 31, go ahead and assume that the assessment will be done on March 31 and report that.”
Amato: So, what concern was TIC, the Technical Issues Committee that I mentioned, seeking to address?
Cheng: So, it’s a great question. I think the concern that at least I personally had and I think most of the TIC members had was most private companies that are trying to comply with GAAP probably know that a triggering event has occurred, because, for example, the pandemic, COVID-19. But they might not necessarily know the technical nuances that you’re supposed to assess it basically at that date or around that time period. What we were asking for is kind of just relief. Could we kind of push that out to the end of the year, which is generally when that assessment is performed?
The FASB I think did look at the issue. That may not necessarily be there. For example, if you issue quarterly statements, you have to do them as of or at the end of that quarter or end of that month if you submit GAAP financial statements. If a private company only issues annual financial statements, for example, for 12 months ended Dec. 31, then you would only have to do the impairment test as of Dec. 31, even if the triggering event occurred in January, February, March, April, whatever.
Amato: What's next regarding the timeline of this accounting alternative?
Cheng: I think last week, I think it was on Feb. 17, the board met and decided to proceed with this. I think they’re working fast and furiously to get a final accounting standards update through, and if they get it out, you could adopt it as long as you have not issued financial statements for that particular year. You can early adopt. They’re trying to work through this as fast as possible. But, yeah, the final accounting standards update has not been issued yet, so this is not yet GAAP, but it should be coming relatively soon.
Amato: Sounds good. Anything to say in closing? We appreciate having you on today.
Cheng: I think that goodwill is going to be an important thing for private companies to assess, reporting under US GAAP. The triggering event guidance is probably not well understood. I encourage everybody to really understand what that is, and if you can make use of the upcoming alternative, please do so.
Amato: Mike, thanks very much.
Cheng: Thank you.