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Will today's children have the motivation and wherewithal to become the lifelong learners who will successfully make the transition from the Industrial Age to the Information Age into the 21st century? "Not unless there is a fundamental change in the current educational model toward a model that is active learning focused," says Thomas B. Kelly, managing director, Western Region of Arthur Andersen and head of U.S. Human Resources.

"In the Industrial Age, most people's work consisted of following orders and using basic skills that didn't vary much form one job to the next. Today's workers by contrast, are 'empowered,' increasingly expected to manage themselves, share brainpower within teams and networks, be technology literate, continuously redefine the way they deliver value, and upgrade skills and knowledge," said Kelly. "Despite the revolution in the workplace, our schools have not changed and continue to graduate students who are largely passive learners, not active, lifelong learners that they need to become."

Arthur Andersen, long regarded as a leader in professional education and training, and believing in the need for educational transformation, undertook its School of the Future Initiative in 1990 to develop and demonstrate a new model for learning. This fall, the Arthur Andersen Community Learning Center will premiere at Encinal High School, in Alameda, California, across the bay from San Francisco where Kelly heads the Arthur Andersen office.

The School of the Future Project was the brainchild of Morton Egol, a New York-based partner who led the development of this new learning model, which is based on combining the best educational practices with technology to create a learning environment that is focused entirely on the learner.

Arthur Andersen conducted extensive research on the strengths and drawbacks of countless educational approaches being used throughout the U.S. and elsewhere in the world.

According to Kelly, the AACLC is an 8,000 sq. ft. one-room schoolhouse. At capacity, 150 randomly selected students from grades 7-12 will share a technology rich environment where teachers become facilitators who encourage learning through discovery using project based activities that have the district's educational requirements imbedded in them.

The curriculum components are interconnected, emphasizing thinking, reasoning, creativity, self-mastery, and problem-solving skills through collaboration and investigation. Students are self-directed, self-motivated, and focused on their future. "Students are learning through discovery in an educational environment that develops the individual's capabilities to be successful in the rapidly evolving workplace," said Kelly, "The School of the Future is here today."

Arthur Andersen expects the AACLC to be a model for other school districts. As this learning approach's benefits gain acceptance, the firm envisions similar centers cropping up across the country. The School of the Future Initiative was funded by Arthur Andersen as a demonstration of its commitment to education and, according to Egol, was undertaken without any anticipation of financial benefit to the firm.

For additional information about Arthur Andersen's School of the Future Initiative, contact Natanya Yellin, School of the Future Initiative, Arthur Andersen, 500 12th Street, Suite 340, Oakland CA 94607. *


By Leo B. Helzel, JD, CPA, and friends
Published by McGraw-Hill, Inc., 197 pages $12.95
Review by Alexander A. H. Bohtling, CPA,
retired from Deloitte & Touche, LLP

Most of us dream of accomplishing great things, but settle on the more mundane. We dream of starting a highly successful business venture in the mold of Bill Gates, but settle for a bimonthly compensation check. Leo Halzel, with a background of many entrepreneurial ventures and 27 years of teaching entrepreneurship, innovation, and business development at the Haas School of Business at the University of California, Berkeley, has put together a volume of his own material and others to help those serious about breaking the mold and moving forward with their own business ventures. The contributors include the chairman and CEO of a major bank, partners in Big Six accounting firms, including one of its retired chairmen, academics, corporate board chairs and presidents, attorneys at law, and investment bankers.

According to Helzel, a major key to converting the dream into reality is to set a deadline for when the dream will be realized.

The book consists of 13 chapters‹The Entrepreneurial Process and You; Planning to Implement the Dream; Raising Money; Management Matters; Decisions! Decisions!; People, Pay, and Perks; Sell! Sell! Sell!; Keeping Customers Happy; Developing and Perfecting the Product; Going Global; Tough Times; Conserving Cash and Keeping Score; and the Harvest or the Bailout. As you can see by the chapter headings, the setting of the deadline must also be accompanied with hard work, plenty of common sense, and resilience in the face of cash-flow problems. The book also has a glossary.

The chapters contain numerous brief but very clearly presented observations and words of wisdom, such as performing work in the segment most familiar to you, obtaining the assistance of knowledgeable professionals, getting a second opinion before making that all-important final decision, and the best approach for doing business in another country.

In your reviewer's opinion, this book presents very useful advice to wannabe entrepreneurs who are willing to set a deadline and work very hard for that illusive dream--and those that seek to advise them. *


Sidney Kess, CPA, has long been one of the most popular creators and presenters of courses and updates on taxation matters. His intense style combined with a willingness and ability to listen to the tax practitioner has always led to presentations jam-packed with tidbits and practical advice‹truly bang for the buck.

Evoke, a producer of interactive multimedia programs for self-study recently announced the launching of a CD-ROM-based product‹Kess' 1996 Individual Income Tax Update. This is the second Kess product for Evoke, which featured him in a 1995 update last year. If Kess' energy and enthusiasm can be captured in a CD-ROM format, the self-study market takes on a completely new dimension. According to Evoke, the course provides eight hours of CPE credit using full-motion video, sound, and graphical and textural elements to focus on significant tax changes in 1995 and 1996 affecting individual income tax planning and compliance.

The price for a one-user copy of Kess' 1996 Individual Income Tax Update is $139. For ten users it is $1,005. Add $65 for each user above 10. Evoke is located at 6150 Stoneridge Mall Road, Suite 365, Pleasanton CA 94588; (510) 467-1200. *


By Nancy Herring, Georgia Southern University

[Editor's note: This is the fourth article in a series commemorating the 100th anniversary of the first CPA licensing law, the issuance of the first CPA certificates, and the first CPA exam. The articles were solicited and compiled by the AICPA in recognition of the these important historical events.]

Eric Kohler may now be best known for his Dictionary for Accountants, but his influence on the profession goes beyond the dictionary. He was editor of the Accounting Review for nearly fifteen years (1928-1942), was twice president of the American Accounting Association (1936 and 1946), was controller of the Tennessee Valley Authority (1938-1941) and of the Economic Cooperation Administration (the Marshall Plan) (1948-1949), was a professor at Northwestern University (1922-1928), wrote several accounting textbooks, and spent many years in public practice, first with Arthur Andersen and then on his own. His importance to the profession was recognized in 1945 when he received the AICPA Gold Medal for Distinguished Service and again in 1961 when he was inducted into the Ohio State University Accounting Hall of Fame.

Eric Kohler is remembered as one who was impressive both in appearance and in the strength of his convictions. He stood 6'4" in a time when that height was exceptional. One colleague notes: "A mutual friend arranged for Eric and me to have lunch. I walked into his office in downtown Washington for introductions. He started coming up from behind his desk, and I thought that he would never stop. He held out his right hand, and I thought he had a baseball glove on it."

Kohler was impressive not only in appearance but also in the strength of his convictions. His angular features seemed to forewarn one of his tenacity in holding to his positions, and he was known for being outspoken in his views. He was a firm advocate of historical cost-based valuation, believing that price, reflected in arm's-length transactions with outsiders, was the only defensible basis for reporting. He believed that income should be measured on an all-inclusive basis: A series of income statements should provide a historical summary of the operations of the enterprise.

Most of all, Kohler believed that clear definition was vital to the development of the profession. He was impatient with equivocal language which he thought was designed to obscure rather than enhance communication. He criticized what he called "loose terms" whose meanings were kept sufficiently vague to suit a variety of speakers, listeners, and situations or to allow members of a committee to reach agreement. Such words include: acceptable, adequate, appropriate, desirable, material, meaningful, sound, and useful.

Kohler's Dictionary, first published in 1952, was his effort to better define accounting terminology and, consequently, accounting standards and professional responsibility. He began developing the dictionary in 1937 when the American Institute of Accountants' Committee on Terminology was abolished, and revising and rewriting the dictionary became a lifelong occupation. The dictionary, in fact, was its author's vehicle for discussing issues facing the profession. Several of the definitions are actually essays detailing what the author believed was the correct approach in areas such as valuation, income measurement, disclosure, and professional responsibility. As one reads, it becomes apparent that the book was more than a dictionary: It was Kohler's expression of his accounting theory.

Eric Kohler has been called an accounting giant. Those who knew him remember most clearly his impressive presence, his serious demeanor, his vast knowledge of accounting, and his integrity and dedication to high principles. These characteristics made him a force to be reckoned with in the development of the profession. *


The Wizard of Oz turned the cowardly lion into a confident king of the beasts by giving him a badge of courage. Designations are very useful in today's complex society where expertise and competence are essential. The National Endowment for Financial Education (NEFE) and its many related organizations have been in the designation business for many years. Most well known is the CFP or Certified Financial Planner designation from the Certified Financial Planner Board of Standards, Inc.

NEFE recently announced a new designation from its Institute for Wealth Management called the Accredited Asset Management SpecialistSM. This designation is the second issued by the institute, the first being the
Chartered Mutual Fund CounselorSM designation.

According to NEFE, to receive the AAMS designation, students must complete the Accredited Asset Management Specialist Professional Education Program, pass a rigorous comprehensive exam, and sign a code of ethics. The study program consists of 12 modules which can be enrolled in their entirety or by purchasing individual modules of choice. *


Last year, Congress required the IRS to test the concept of using private collection agencies to collect delinquent taxes. Cases to be included in the pilot program include failure to deposit employment taxes.

On June 17, the IRS announced that it had awarded contracts under the pilot program to the following five firms:

* Aman Collection Service, Inc., Aberdeen SD

* Continental Credit Service, Kirkland WA

* CSC Credit Services, Houston TX

* GC Services, Washington DC

* Unger & Associates, Dallas TX

The IRS will provide the collection agencies with limited case information on individuals and businesses with outstanding tax liabilities. The private firms will try to find and contact the taxpayers and remind them of their outstanding taxes. Taxpayers will be informed of ways to resolve their tax problems, such as installment arrangements and extensions.

The private agencies will be working on taxpayers currently or formerly located in Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, and Wyoming.

According to the IRS, contractors will be limited to locating delinquent taxpayers, reminding them of their tax liabilities, securing promises to pay the IRS or commitments to enter into IRS installment agreements, monitoring payments against promises and commitments, and following up with taxpayers. Contractors may use telephone, mail, and other methods of contact, but they are strictly prohibited from initiating direct, in-person contacts. All payments resulting from contractors' efforts will be made directly to the IRS, not to the contractors.

The contract provisions ensure that the privacy and rights of taxpayers are protected, and contractors must comply with all Federal laws relating to collecting tax liabilities, including the Internal Revenue Code of 1986 (specifically including the disclosure provisions of the Code that prohibit improper disclosure of taxpayer information), the Privacy Act of 1974, Fair Debt Collections Practices Act, and the Taxpayer Bill of Rights.

The Contractors will be paid a fixed percentage of each successful contact the IRS accepts. In addition, contractors will also be paid performance fees based on the results of the contact--full payment within 30 days; extensions of time to pay; installment agreements completed by the contractor; or installment agreements completed by the IRS. The IRS emphasized that contractors will not be paid based on a percentage of what is collected. *

Source: IRS News Release IR-96-31


[Editor's note: This is the second in an ongoing series of commentaries by Journal editor Michael Goldstein on firm culture and its importance in setting a tone for success.]

Does a firm's culture determine what its compensation system will be like or does the compensation system reveal what a firm's culture truly is? Both are true! Where do you want to start, with the chicken or the egg?

Is your firm's evaluation and compensation system in tandem with its mission statement? Is the firm's mission in writing; is everyone in the firm aware of it? What is the firm trying to accomplish? Where is the operational emphasis, new business, new specialties, client service, or just plain "getting the work out"? Maybe all of the above. Did your firm consciously create a mission and then show support for that mission through actions related to compensation? Is the compensation emphasis directed at challenge or security? Do the priorities and proposed compensation levels match? Is the firm consciously encouraging and compensating what it wants produced? And, if everyone in the firm can agree on a culture that says that the good of the firm should come before that of the individuals within the firm, then what is your firm's compensation system doing about‹

* not pushing partners to the point that they concentrate on playing the numbers game, rather than what is good for the client or the firm, e.g., pushing billable hour requirements to levels that make keeping the other guy (staff or partners) out the only means for survival?

* encouraging each partner to do the job for which he or she is best suited, v. taking care of certain groups--e.g. rainmakers and management--to the virtual exclusion of others? More compressed compensation levels may just cause people to do what they do best. I am not aware of such a firm but I wonder if one exists where, regardless of the job, compensation is based primarily on doing your job well. While differences in monetary rewards are appropriate among the various jobs, there could be enough compression in the differences to encourage individual partners to want to do the job that he or she does best and not just try for spins with the big bucks. Sounds like a partnership, but even partners have egos and maybe sometimes become a little too hungry.

* not creating a "them and us" environment (the rainmakers vs. the techies)

* getting partners to avoid posturing, especially when evaluation time draws near (this is a real trick).

* differences in commitment and productivity, including the bottom line of each practice, with less regard to the total dollar size of the practice.

* emphasis on new business v. necessary and real quality.

* setting uniform and fair criteria for compensation to both partners and employees, including rewards for other attributes, such as training and teamwork, to say nothing of "superior" technical

* not making the position of managing partner the reward for being the number-one rainmaker? Managing partners should be counseling, giving direction to, and acknowledging other partners regarding their practice development efforts, not competing with them for rewards. This is not to say that managing partners should stop bringing in business‹it's also a part of their job‹but their compensation should come from what their people are able to accomplish (e.g., making the group succeed or fostering a firm culture based on teamwork).

I once heard of a firm where all the partners received the same compensation. An individual partner could only expect an increase in compensation if the firm as a whole did better. Such an approach has many problems‹let's face it, there are individual differences in the contributions made by each of the partners. But it certainly could lead to cooperation and a sense of teamwork where all partners worked together for the common good of the firm.

A firm's approach to compensation says a lot about its culture and personality‹what it views as important. *


By Paul K. Piccone

As CPAs, we enjoy the rewards of being part of a profession. These include job satisfaction, prestige, continual challenge, and monetary reward. These come, however, at the expense of long hours, stressful situations, and an essentially sedentary lifestyle.

Being physically fit will prepare you to deal with the long hours and enable you to negate the effects of stress. Improved physical fitness can also increase self-esteem, and there are indications that regular physical exercise can help prevent or mitigate the effects of many conditions such as osteoporosis, hypertension, and diabetes.

The most common reason professionals give for not exercising is, "not enough time." If you really think about it, though, you can make time for anything to which you are committed, whether it's family, career, clients, or continuing education. Look at your appointment book and fill in the activities you must do in every hour. Notice where you have blank spots--even if for just a half hour. Couldn't you fit a short five to ten minute walk into that slot? Identify various available moments, and make appointments with yourself to exercise at those times. Actually write the appointments into your book.

Develop a support network consisting of two sets of people. In the first set, include people who will exercise with you. Can you enlist the aid of neighbors, family members, or friends at work? Position exercise as a great adventure on which you are embarking. In the second set, include people who will give you ongoing encouragement to continue your fitness program, especially when time pressures are at their greatest. Enlist people who already exercise on a consistent basis to be your moral supporters. What about those who will try to discourage you? Explain to them that you are trying to develop healthy habits and that exercise is important to you. Ask them to join you and tell them that their support would be appreciated. Even if they won't support you, they will be more aware of your needs and presumably will not undermine your efforts.

What are you trying to gain from exercising? Lose weight, build muscle, or improve your overall health? If you write down specific goals, they will act as a beacon moving you in the right direction. Make goals you can chart so that you can see improvement as it occurs. Create a short-term plan for next month and one for a longer time period, say four or six months. Set realistic goals, such as walking five more minutes every week, or losing one pound of fat a month. Don't expect to lose 30 pounds in two weeks. As motivation, set a target date for accomplishing your goals. For optimal physical fitness, you should work up to performing cardiovascular exercise like walking or bicycling three to five times a week for 20 to 60 minutes. Of course, whatever exercise you do will provide health gains, so don't be concerned if you can't reach this frequency at first. If setting goals seems difficult, enlist the aid of an experienced exerciser, personal trainer, or fitness instructor.

You should begin your program gradually and build up to more strenuous activities. Your may want to check with your doctor before beginning, especially if your have a prior history of injuries or medical conditions [including high blood pressure or high cholesterol], are pregnant, smoke cigarettes, have a family history of heart disease, or are a man over 40 or a woman over 50-years of age. You might feel stiff or sore when first starting a program, but you should never feel pain. Pain is the body's way of telling you that something is wrong. You should not feel exhausted at the end of a workout. If you fell pain or feel yourself getting overtired or out of breath, check with your doctor. Muscle soreness tells you that exercise is affecting your body, so it is actually a good sign. Proper stretching will help alleviate such discomfort.

How to Stick with the Program

Here are some tips to keep you going:

* Identify potential excuses for skipping exercise. Then develop ways of overcoming those obstacles. In the middle of an important project? Gain time during your lunch hour by bringing lunch from home or grabbing a sandwich from a deli.

* Find a role model. Learn from a consistent exerciser what he or she has done to be

* Wear a portable stereo if you work out alone. A book tape or your favorite music will help to keep your interest and enable you to keep on going.

* Leave your gym bag near the front door the night before you plan to exercise. You won't forget to bring the bag to work, and going directly from the job is a way to increase the likelihood you'll complete all your scheduled workouts.

* Make appointments to exercise with friends. You are less likely to cancel an appointment with a friend than with yourself.

* Plan a variety of activities to avoid boredom. These could include walking, running, swimming, using cardiovascular equipment, strength training, hiking, and aerobic dance.

* Don't push yourself too hard since you will receive little additional benefit from exercising out of your comfort zone. Exercise should be a challenge, but if it is too difficult you will not want to continue.

* Set up a reward system for yourself. Promise yourself that if you exercise for a certain number of days, you will give yourself something such as a weekend trip, a book, or a CD.

* Keep a training log to remind yourself of your accomplishments and to motivate you to continue.

* Get information on health and fitness by reading books and magazines and talking to fitness instructors or personal trainers. The more knowledgeable you become, the better able you'll be to guide your own personal program. *

Paul Piccone, CPA, is a sole practitioner who is also a personal trainer certified by the American Council on Exercise.


By Andrew Denka

"How can I share office space and not drive my co-workers crazy?" "What should I wear on casual days?" "Some people hate voice mail; what can I do so they won't hate mine?"

Questions like these are emerging for many who are pondering the rules of office etiquette and wondering what is "politically correct" in a fast-changing workplace.

The importance of etiquette is sometimes overlooked in the current competitive business climate‹but courtesy in the workplace is now more important than ever. The fast-paced high-tech office environment of today makes it imperative, especially if companies are to maximize productivity and work flow.

The new rules of office etiquette are still based on many of the same principles as those of the past. Ethics, consideration for others, and professionalism never go out of style in the business world. Following are some tips on etiquette for the "new" workplace:

Cyber-Sensitivity. If you're comfortable zooming around the Internet while your co-workers or supervisors have never sent e-mail or gone online, be tactful about your expertise. Share what you know, but don't act surprised at your colleagues' lack of knowledge. Don't try to force communication via e-mail with someone who prefers written memos or face-to-face meetings.

"Casual Day" Dilemmas. For most organizations, casual does not mean sloppy; don't assume that torn jeans and a sweatshirt will be acceptable attire. Whether your company allows casual dress one day each month or even daily, find out if there's an official policy on the subject and, if so, follow it. And remember, dressing too conservatively is usually safer than dressing too casually.

Fax Etiquette. Never read faxes meant for others‹it's as much an invasion of privacy as opening their mail. Don't use the fax machine to send very long documents. Call recipients before you send faxes, especially if they don't know you, and always include a cover page. Avoid sending unsolicited resumes by fax when job hunting.

Voice Mail Mania. Callers find long greetings frustrating‹keep yours short and to the point. And if you're making a sales call, opt for speaking in person rather than leaving a message on voice mail. You may come across as presumptuous if you ask the contact to call you back.

Shared Workspace. Shared office setups of the '90s make it vital to respect others' periodic need for uninterrupted, focused work time. Don't assume that because collaboration is encouraged, it's OK to frequently break the concentration of a colleague who is hard at work.

Computer Privacy. Respect a colleague's computer files as you would the files in his or her desk; if you use someone else's computer, never move or alter files, or change the screen format. When sharing a printer, warn others before printing a long document or printing on unusual paper or letterhead.

By taking a thoughtful approach to issues like these, you will create an environment in which courtesy paves the way for more work to be accomplished. *

Andrew Denka is the executive director of OfficeTeam, specializing in the placement of temporary and permanent administrative and office support professionals.


By Peter C. Barton, JD, CPA, and Roy C. Weatherwax, PhD, CPA, University of Wisconsin‹Whitewater

In Dwyer v. Commissioner, the Tax Court ruled that a taxpayer diagnosed with a biochemical depression was not disabled for purposes of avoiding the 10% penalty on early distributions from a qualified retirement plan. Dwyer is important because a number of aging Americans now facing corporate downsizing and/or early retirement may make early withdrawals from retirement plans.

IRC Sec. 72(t) imposes an additional 10% tax on any taxable amounts received from qualified retirement plans by taxpayers under age 59Qs. Included among the exceptions is one for disabled taxpayers, which Sec. 72(m)(7) defines as taxpayers who are "unable to engage in any substantial gainful activity due to a medically determinable physical or medical impairment which can be expected to result in death or be of a long-continued and indefinite duration."

Reg. Sec. 1.72-17A(f) indicates that substantial gainful activity is the work, or comparable work, the taxpayer did prior to the disability. The severity and nature of the impairment, as well as the taxpayer's education, training, and work experience, will determine whether the taxpayer can do such work. A remediable impairment is not a disability. "Indefinite" means that it cannot reasonably be anticipated that the impairment will, in the foreseeable future, be so diminished as no longer to prevent substantial gainful activity."

Several examples of impairments are given in Reg. Sec. 1.72-17A(f)(2). Included are the loss of use of two limbs, brain damage causing severe loss of judgement, certain progressive diseases, heart disease that does not respond to medical treatment, etc. Examples of mental impairments are psychosis or severe psychoneurosis, which require "continual institutionalization or constant supervision of the individual." These categories of impairments, if they prevent the taxpayer from working, would qualify as disabilities.

In Dwyer, Robert Dwyer, a stock trader, organized Hampton Partners in 1989. Dwyer was the general partner, and one of the three limited partners. Together these partners invested $1,750,000. The partnership lost a substantial amount in 1989. Although Dwyer made payments to the other partners, they sued him. In October 1989, Dwyer, age 53, withdrew $208,802 from his individual retirement account and used it to trade more stocks. He intended the withdrawal to be a loan, but was unable to repay it due to continuing stock trading losses. He reported the $208,802 on his 1989 return, but did not pay the 10% Sec. 72(t) tax. The IRS assessed $20,880 in additional tax.

Also in 1989, Dwyer was diagnosed with a biochemical depression, which deepened due to the lawsuit. After taking medications that worsened his condition, Dwyer consulted a second psychiatrist, Dr. Gardner, whose adjustment of the medications "cleared up" Dwyer's condition in six weeks. Dwyer continued to see Dr. Gardner for two years, after which Dwyer could no longer afford his fees. Dr. Gardner testified that Dwyer's depression continued into the spring of 1992 and the depression is a "devastating psychiatric disease."

The Tax Court ruled that Dwyer's depression was not a disability because he continued working as a stock trader. Dwyer argued that since he incurred losses, the trading was not "substantial gainful activity." The court explained that the profit-making objective, not the result, controls.

Dwyer also argued that the regulation's "continual institutionalization" requirement was too restrictive. The court pointed out that, although continual institutionalization is not necessarily required, Dwyer's psychiatric consultations did not reach the level of "constant supervision." The court did not clarify what would constitute "constant supervision." Finally, Dwyer argued that it was uncertain in 1989 whether his condition would improve. The court pointed out that his long-term prognosis was irrelevant because he continued working throughout 1989.

The lesson of Dwyer is that a taxpayer must be unable to work for the foreseeable future to qualify as disabled under IRC Sec. 72(t). Clearly a taxpayer who continues doing similar or comparable work is not disabled. Also, Dwyer suggests that it would be difficult for a taxpayer to qualify as disabled who has returned to work by the time the IRS assesses the 10% tax. *

Source: Dwyer v. Commissioner, 106, T.C.___, No. 18 (May 15, 1996).


In the process of editing the article"Implementing SFAS No. 121 for the Impairment of Real Estate"by Abraham E. Haspel appearing in the July issue of The CPA Journal, the word use was substituted for the word sale in a sentence in the paragraph on page 39 beginning under the heading Real Estate Development. In order to avoid no misunderstanding the complete paragraph is reproduced below, with the correct word,"sale," in italic for emphasis.

Real Estate Development

The appendices to the statement do not clearly state that their references to real estate development only apply to the development of real estate held for sale and do not apply to real estate held for use. Consequently, an incorrect inference can be drawn from SFAS No. 121 that all completed real estate development projects that have carrying amounts greater than their fair values are adjusted to fair value. In fact, only completed real estate projects held for sale are only adjusted in this manner. Completed real estate projects held for use are only adjusted if they fail the undiscounted cash flow test as previously discussed. This observation has been confirmed by FASB staff.

In addition, the last paragraph beginning in the first column of page 41 states that the significant estimate disclosure in the financial statements of a real estate venture could include estimates and assumptions used in determining an impairment loss. It goes on to state such disclosure is not required by SOP 94-6, Disclosures of Certain Significant Risks and Uncertainties. The author wishes to make it clear that this lack of applicability of SOP 94-6 is to the second disclosure requirement dealing with the use of estimates. He points out, however, if it is reasonably possible the estimate of loss will change in the near term and such change could be material, that disclosure would be appropriate under the third disclosure requirement of SOP 94-6. *


The Entrepreneurship and Personal Enterprise program, associated with Cornell University, has embarked on a series of studies on entrepreneurship, with the objective of helping to start, manage, and grow businesses. The first study, "Creating a New Venture? Business Activities Essential for Entrepreneurship," was published in the Spring of 1996 and sought, through the use of focus groups, to identify the kind of information entrepreneurs need to successfully start a new business and the places and ways in which the entrepreneurs can presently obtain that information. The perceived benefits to society in terms of new jobs and other economic activity of successful new ventures is the reason for the study.

The study identified the top ten essential activities for starting a business as seen by business owners, business professionals, and community leaders. While the top ten list was not the same for each of the groups, there were four activities that made it to each and 18 items comprised all the items on the three lists. The four common items were--

* anticipating cash flow requirements

* organizing finances

* business planning

* locating sales prospects.

The study, based upon the focus groups--28 groups to which 822 business owners and entrepreneurs, professionals providing services to small and independent businesses, and community leaders were invited-- then discussed the ways in which start-up business owners can learn about the essential activities.

The report concluded with a number of findings and recommendations. Of interest to CPAs are the following:

* Business professionals (CPAs and lawyers) complete few formal courses and have limited training in entrepreneurship or small business although they are often called on first for their expertise. Professionals may not be in a position to increase their list of client services to include the labor-intensive process of teaching clients about owning a business.

* There is a dearth of research or customer-focused resources on the topics, times, tools, trends, or techniques for effectively teaching entrepreneurs and business owners essential business knowledge and skills.

* Educational institutions continue to be the natural location to focus on securing human capital assets but only when the education occurs in cooperation with similar businesses and trusted professional associations and only when the education focuses on the needs of the customer.

These findings lead to the following possible courses of action for CPAs:

1. Individual CPAs could take educational courses on matters of interest to entrepreneurs in start-up situations. Many start-up business owners, however, don't have any idea of the cost of professional services and resist paying a reasonable fee--they would rather put the money in the businesses. The issue then becomes whether it makes sense to invest time and knowledge in a start-up with the hope it will be successful and at some point able to pay reasonable fees.

2. CPAs and CPA firms could form partnerships with educational institutions to conduct training for entrepreneurs in what the report calls "business teaching factories."

3. CPA and CPA firms could initiate training or networking programs in local communities to attract business owners to get a taste of how the CPA professional can help local businesses.

4. CPAs and CPA firms could attempt to inform business owners of the help a CPA can give in a start-up situation by promoting the increased likelihood of success if a financial adviser is involved.

The Cornell report, written by S.S. Tyler, makes a strong case for the benefits to start-up businesses of a strong understanding of financial matters. The question for the CPA professional, is whether there is a potential here for expanded services for which the marketplace will return a reasonable fee. *

For additional information about the report, contact the Entrepreneurship and Personal Enterprise program, 51 Warren Hall, Cornell University, Ithaca NY 14853; (607) 255-1576.

The CPA Journal is broadly recognized as an outstanding, technical-refereed publication aimed at public practitioners, management, educators, and other accounting professionals. It is edited by CPAs for CPAs. Our goal is to provide CPAs and other accounting professionals with the information and news to enable them to be successful accountants, managers, and executives in today's practice environments.

©2009 The New York State Society of CPAs. Legal Notices

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