February 2020 Article Archives

More Companies Are Opting for Hedge Accounting

Published on February 21, 2020

Early adopters of the new hedge accounting standard that took effect for public companies’ 2019 fiscal years drove an uptick in the use of hedge accounting in 2018, new research shows. 

Chatham Financial’s analysis of corporate hedging in 2018, the latest year for which hedging data can be compiled, indicates that 53% of U.S. public companies with commodities hedging programs applied hedge accounting to them. 

That was up from 45% in 2015, when Chatham last performed the research. 

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Balance Sheet Liabilities Jumped After Lease Accounting Change

Published on February 21, 2020

The new lease accounting standard caused lease liabilities for the average company to increase a whopping 1,475 percent, skyrocketing from $4.4 million before the transition to $68.9 million post transition, as operating leases were recorded on the balance sheet for the first time, according to a new study. 

The study, from the lease accounting software provider LeaseQuery, analyzed more than 400 companies in its customer base and found that the increase was particularly striking in certain industries, such as financial services, where the amount of the average lease liability increased 6,070 percent. Similarly, in the health care industry, average lease liability liabilities went up 1,817 percent, in the restaurant industry 1,743 percent, in the energy industry 1,542 percent, in retail 1,012 percent, and in manufacturing 495 percent. 

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Key Steps to the Lease Accounting Close

Published on February 21, 2020

While some organizations have transitioned smoothly, others are still struggling to make the necessary business process and control changes.

To comply with the new lease accounting standards, organizations have had to implement new business processes, new organizational structures, and new information systems. Most organizations have muscled through the first year of adoption using a combination of brute force and high-priced consultants. However, those approaches will not scale over the long term.

The technical accounting changes promulgated under the new standards are just one aspect. Accountants will have to make significant judgments to conform with the new lease accounting rules. Those judgments must be regularly re-evaluated and updated as facts and circumstances become known, and contingencies resolved.

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How to Prevent Employee Data Theft

Published on February 21, 2020

While organizations have invested heavily in protecting their sensitive data, even the world’s most sophisticated companies often overlook a persistent risk when it comes to potential data theft: their own employees. 

Most data theft is perpetrated by outside actors, including criminal syndicates, according to an analysis of 41,686 security incidents for the 2019 version of the Verizon Data Breach Investigations Report. But more than a third, or 34%, of worldwide data security incidents were perpetrated or aided by employees or contractors from within organizations, according to the Verizon report. 

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What Are the Potential Tax Advantages of the LLC, C Corp and S Corp?

Published on February 21, 2020

As an accounting professional, you know there are potential tax-related upsides and downsides for every type of business entity. It’s important to communicate those considerations to your clients to help guide them as they decide which legal business structure to form for their company. In addition to your insight, of course, your clients should also consult a knowledgeable business attorney who can share the legal ramifications of the various business entity types.

Let’s take a moment to lay out the tax pros and cons in a way that may make it easier for you to cover all the bases in your conversations with your clients.

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Phone Hacks Can Happen to Anyone. Here's How to Protect Yourself

Published on February 21, 2020

Start by knowing what could expose you to an attack, like vacation clues, hotel Wi-Fi and inadequate verification procedures. 

The mobile phone belonging to Jeff Bezos, the founder and chief executive of Amazon, was allegedly hacked when he clicked a video sent through WhatsApp, essentially turning over control of his phone and all of its contents to the hackers. 

Compromising the security of the world’s wealthiest man is no mean feat. But hackers are using more surreptitious ways to gain access to people’s financial lives and threaten their wealth.

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Attention Taxpayers: Your Chances of Getting Audited Have Fallen Significantly

Published on February 07, 2020

KEY POINTS

As the adage goes, the only sure things in life are death and taxes.

But tax audits are another thing entirely. 

A taxpayer’s chances of getting audited by the IRS have fallen significantly over the past decade. 

The agency audited 0.45% of individual tax returns in fiscal 2019, which ran through Sept. 30, 2019. That figure is down from 0.59% in 2018, and down by more than half from what it was in 2010, when 1.11% of taxpayers were audited.

In other words, roughly 1 out of every 220 taxpayers were audited last year. A decade ago, those odds were closer to 1 in 90. 

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Audit Fees Keep Rising, Thanks to New Accounting Standards

Published on February 07, 2020

Average audit fees increased 4.25 percent from 2017 to 2018, going from an average of $2,220,251 in 2017 to $2,314,703 in 2018, mainly driven by new standards from the Financial Accounting Standards Board, according to a new report. 

The report, from the Financial Education & Research Foundation, an affiliate of Financial Executives International, found that more public companies are seeing an increase in the volume of work needed to get an audit report from their outside auditors (73 percent) than private companies (27 percent) and nonprofit organizations (22 percent). 

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The Best Skills to Have on Your Resume

Published on February 07, 2020

Writing a good resume is a tricky balancing act.

You want to impress recruiters by highlighting your skills and experiences, but you don't want to overwhelm them with too much information either.

The key to striking the right balance and making your resume stand out is to include skills that are tailored to the position you're applying for.

"A resume is a foot in the door," Vicki Salemi, a career expert at Monster, told CNN Business. A well-tailored resume that highlights skills that are most important for the role and that you can back up with specific accomplishments or experiences will intrigue a recruiter and help get you through the door.

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IRS Issues 2020 Standard Mileage Rates

Published on February 07, 2020

The optional standard mileage rates for business use of a vehicle will decrease slightly in 2020 after increasing significantly in 2019, the IRS announced on Tuesday (Notice 2020-05). For business use of a car, van, pickup truck, or panel truck, the rate for 2020 will be 57.5 cents per mile in 2020, down from 58 cents per mile last year after increasing from 54.5 cents per mile in 2018. Taxpayers can use the optional standard mileage rates to calculate the deductible costs of operating an automobile. 

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