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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 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 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. 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. 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.
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