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The Financial Accounting Standards Board: New Lease Accounting Standard Update

By: Andrew Roffe, Staff Accountant

The Financial Accounting Standards Board’s (FASB) new lease Accounting Standard Update (ASU) is fast approaching and will bring a major change to lease accounting. The ASU presents challenging issues for management accountants, predominantly accountants with large lease portfolios. The new standard will also require organizations to recognize the leases on the balance sheet– assets and liabilities –for the rights and obligations created by those leases. For non-public companies and other organizations, the ASU will take effect with fiscal years beginning after December 15, 2019 and with interim periods within fiscal years beginning after December 15, 2020.

FASB issued the standard in February 2016 with the goal to improve financial reporting about lease transactions. The ASU affects all organizations that lease assets such as real estate, airplanes, ships, constructions, and manufacturing equipment. The ASU will require disclosures to help investors and other financial statement users by providing more transparency into the leases effects on cash flows. The new guidance will require lessees to record leases with terms of more than 12 months. Currently, GAAP only requires capital leases to be reported on the balance sheet.

However, the accounting for organizations that own the assets leased will remain mostly unaffected from current GAAP. The slight improvements that the ASU does contain is to bring into line lessor accounting model with the lessee accounting model and with the updated revenue recognition guidance issued in early 2014.

This undertaking began in 2006 when the FASB and the International Accounting Standards Board (IASB) began working on a joint project to improve the financial reporting of leasing activities. FASB and the IASB conducted widespread outreach with diverse groups that included meetings with prepares and users of financial statements, public round tables, preparer workshops, and three issued documents for public comment.

FASB Chair Russell G. Golden stated, “When the new FASB and IASB leases standards take effect, they’ll provide investors across the globe with more transparent, comparable information about lease obligations held by companies and other organizations.”


Look for more information on this topic from Holbrook & Manter in future posts. In the meantime, please reach out to us with any questions you may have.

H&M Welcomes New Staff Accountant

Holbrook & Manter is happy to announce that Jennie Schott has joined our growing team. Jennie joins as a staff accountant and works out of our Grandview Yard location.

Originally from Canal Winchester, Jenny is a Capital University graduate. She shares that she decided that accounting was the field for her after learning more about the profession through business classes. Prior to coming to H&M, Jennie interned and worked for BDO Columbus working with clients in various industries including hospitality, manufacturing and non-profit.

Jennie shares that frequent client interaction is one of her favorite parts about her position with Holbrook & Manter. In her spare time she enjoys outdoor activities such as hiking, camping and walking her dog. She also enjoys spending time with family and friend.

Welcome to the H& M family, Jennie!



Getting Remarried? Be Sure to Update your Estate Plan

If you’re in a second marriage or planning another trip down the aisle, it’s vital to review and revise (if necessary) your estate plan. You probably want to provide for your current spouse and not inadvertently benefit your former spouse. And if you have children from each marriage, juggling their interests can be a challenge. Let’s take a look at a few planning tips.

Take inventory

Have you updated your will, trusts and beneficiary designations to name your current spouse where desired? Bear in mind that the terms of your divorce may require you to retain your former spouse as beneficiary of certain pension plans or retirement accounts.

Next, assess your financial situation and think about how you want to provide for various family members. For example, do you want to provide for all children equally? Will you favor biological children over stepchildren?

Also, are children from your first marriage significantly older than children from your second marriage? If so, their needs likely will be different. For example, if children from the first marriage are college age, in the short term they may need more financial support than children from your current marriage. On the other hand, if your older children are financially independent adults, they may need less help than your younger children.

Use trusts

Trusts generally avoid probate, so your assets can be distributed efficiently. However, if you leave your wealth to your current spouse outright, there’s nothing to prevent him or her from spending it all or leaving it to a new spouse, effectively disinheriting your children. To avoid this result, you can design a trust that provides income for your current spouse while preserving the principal for your children.

Trusts are particularly valuable if your children from a previous marriage are minors. Generally, if you leave assets to minors outright, they must be held in a conservatorship until the children reach the age of majority. It’s likely that your former spouse will be appointed conservator, gaining control over your wealth. Even though your former spouse will be obligated to act in your children’s best interests and will be supervised by a court, he or she will have considerable discretion over how your assets are invested and used.

To avoid this situation, consider establishing trusts for the benefit of your minor children. That way, a trustee of your choosing will manage the assets and control distributions to or on behalf of your children.

If you’re preparing for a second trip down the aisle or have recently wed for a second time, contact us for help reviewing and, if necessary, revising your estate plan.

H&M’s Brad Ridge Facilitates Panel Discussion for the Conway Center for Family Business

H&M’s Managing Partner, Brad Ridge, had the honor of facilitating a panel discussion for the Conway Center for Family Business. The topic of the discussion was, “Managing Sibling Relationships during the Succession Planning Process.”

Siblings from Happy Chicken Farms and Citicom Print made up the panel of professionals who were gracious enough to share their succession planning strategies and experiences. The panel touched on everything from the importance of having outside counsel during the process to how they handle various financial aspects of their respective businesses. They also talked about their relationships with their siblings who chose not to work with the family business and how they are planning for integrating future generations into their operations.

H&M is a proud service provider for the Conway Center for Family Business. We extend our gratitude to them for inviting us to moderate today and also thank the panelists.

H&M specializes in working with closely-held and family-owned businesses. For more information on how we can help you with your succession planning needs, contact us today.


Handling Estimated Tax Payments

In today’s economy, many individuals are self-employed. Others generate income from interest, rent or dividends. If these circumstances sound familiar, you might be at risk of penalties if you don’t pay enough tax during the year through estimated tax payments and withholding. Here are three strategies to help avoid underpayment penalties:

1.      Know the minimum payment rules. For you to avoid penalties, your estimated payments and withholding must equal at least:

1.) 90% of you tax liability for the year,

2.) 110% of your tax for the previous year, or

3.) 100% of your tax for the previous year if your adjusted gross income for the previous year was $150,000 or less ($75,000 or less if married filing separately).

2.      Use the annualized income installment method. This method often benefits taxpayers who have large variability in income by month due to bonuses, investment gains and losses, or seasonal income — especially if it’s skewed toward year end. Annualizing calculates the tax due based on income, gains, losses and deductions through each “quarterly” estimated tax period.

3.      Estimate your tax liability and increase withholding. If, as year end approaches, you determine you’ve underpaid, consider having the tax shortfall withheld from your salary or year-end bonus by December 31. Because withholding is considered to have been paid ratably throughout the year, this is often a better strategy than making up the difference with an increased quarterly tax payment, which may trigger penalties for earlier quarters.

Finally, beware that you also could incur interest and penalties if you’re subject to the additional 0.9% Medicare tax and it isn’t withheld from your pay and you don’t make sufficient estimated tax payments. Please contact us for assistance with your estimated tax payments. Don’t play a guessing game with this tricky but very important task.

Trust & Estate Planning: Drafting a Letter of Instructions

When you draft an estate plan, the centerpiece is your will or living trust. Such a document determines who gets what, where, when and how, as well as tying up the loose ends of your estate. A valid will or living trust can be supplemented by other legally binding documents, such as trusts (or additional trusts), powers of attorney and health care directives.

But there’s still a place at the table for a document that has absolutely no legal authority: a “letter of instructions” to your heirs. This informal letter can provide valuable guidance and act as a road map to the rest of your estate.

Taking inventory

Begin your letter of instructions by stating the location of your will or living trust. Then create an inventory of all your assets and include their location, any account numbers and relevant contact information. This may include, but isn’t necessarily limited to, checking and savings accounts, 401(k) plans and IRAs, health insurance policies, business insurance, life and disability income insurance, stocks, bonds, mutual funds and other investments, and any tangible assets your heirs may not readily find.

The contact information should include the names, phone numbers and addresses (including emails) of the professionals handling your financial accounts and paperwork, such as an attorney, CPA, banker, life insurance agent and stockbroker. Also, list the beneficiaries of retirement plans, IRAs and insurance policies and their contact information.

Guidance for personal preferences

A letter of instructions is more than just a listing of assets and their locations. Typically, it will include other items of a personal nature, such as funeral, burial or cremation arrangements, accounting of fees paid for cemetery plots or mausoleums, the names, addresses and telephone numbers of people and organizations to be notified upon death, and specific instructions for handling personal and financial affairs after you’re gone.

The letter can also expand on instructions in a living will or other health care directive. For example, it might provide additional details about the decision for being taken off life support systems. It may also cover charitable contributions you wish to be made after death or the manner in which property should be donated to charity.

Putting pen to paper

As you’re writing your letter, bear in mind that there are no legal requirements backing it. And just like a will or living trust, the letter should be updated periodically to reflect significant changes in your life. Finally, keep the letter in a safe place where the people whom you want to read it can easily find it. Contact us if you have questions about a letter of instructions.

Keep your SOX Fresh!

By: Dave Gruber, CPA- Director, Risk Advisory Services

The Sarbanes-Oxley Act of 2002 (often shortened to SOX ) is legislation passed by the U.S. Congress to protect shareholders and the general public from accounting errors and fraudulent practice on the enterprise, as well as improve the accuracy of corporate disclosures.  Section 404 of Sarbanes-Oxley mandates public companies to issue an internal control report that contains management’s assertions regarding the effectiveness of the company’s internal control structure and procedures over financial reporting.  The steps leading to the company’s assessment can include:

·         Documenting the company’s processes through narratives, flowcharts, and / or matrices

·         Identifying and documenting the key controls present to prevent financial statement errors

·         Evaluating the design of the key controls

·         Perform testing on the effectiveness of the key controls

·         Evaluating the results of the testing

This compliance work of documenting and testing the internal control structure can be an arduous task. SOX  is no longer in its infancy – large companies have been performing SOX work for over 14 years.  Like with most things in life, after you have been doing things so long, it can be easy to fall into the trap of doing things “the way we always have”.  With SOX procedures, this could mean assuming things have not changed from the prior year and continue on with the documentation and test procedures “the way we always have”.  To combat this complacency, the following items are just some of the things that can be done prior to starting your SOX compliance project to insure there is a fresh and complete approach to your SOX compliance on an annual basis:

·         Hold a detailed planning meeting:

-Have there been any major changes in the business that could have an effect on the control environment:

-Major acquisitions?

-Shift in business model?

-Changes in the economy and / or industry?

-Increase / decrease in division profitability?

-Any change in major customers?

-Have there been any changes in scope?

-Any changes in key personnel?


·         Conduct a detailed review of the processes from a “fresh set of eyes” concept, including:

- Walk throughs of the documentation with the process owners, noting changes, where necessary

-Re-evaluate the design of the key controls

-Update test plans, as necessary

Making the above items an integral part of your Sarbanes-Oxley compliance project can help keep your SOX “fresh”! Contact me today for more information regarding SOX compliance. I would be happy to help.

Maneuvering though the Medicare Maze

Maneuvering though the Medicare Maze

Part 1: Overview

Medicare is health insurance for people 65 or older, people under 65 with certain disabilities, and people of any age with End-Stage Renal Disease (ESRD) but it works like no other insurance you have known.  Medicare is not a one-size-fits all system.  Rather, it is made up of several parts with each part covering different aspects of health care costs.  There are many decisions to be made and much to understand with regards to deciding if and/or when to sign up for the various parts of Medicare.  There are also various deadlines for enrollment for the various parts with potentially expensive and permanent penalties for failing to meet them.

A good place to start is an overview of the various parts and what they cover:

Medicare Part A (Hospital Insurance) helps cover:

  • Inpatient care in hospitals and certain limited skilled nursing facility care
    • Services of professional nurses
    • Semiprivate room
    • Meals
    • Other services provided directly by the hospital or nursing facility including lab test, prescription drugs, medical appliances and supplies and rehabilitation therapy
    • Hospice care
    • Home health care

Medicare Part A might more accurately be called coverage primarily for nursing care. It does not cover the services received from doctors, surgeons, or anesthetists while in a health care facility.  It also does not cover custodial or long-term inpatient care in a skilled nursing facility.

The vast majority of people in Medicare are eligible for Part A at no cost for premiums.  It is essentially paid for in advance by the Medicare payroll taxes contributed from earnings while working. It is “free” unless the enrollee or their spouse has not accumulated 10 years of work credits in Social Security.  Those without enough work credits will pay a premium for Part A coverage. However, Part A services are not free.  The patient is responsible for deductibles and co-payments for specific services.

Medicare Part B (Medical Insurance) helps cover:

  • Medically necessary services from doctors and other health care providers
  • Outpatient care
  • Some inpatient care when patients are placed under observation instead of being formally admitted
  • Approved Home health care not covered by Part A
  • Durable medical equipment
  • A wide range of preventive healthcare services (with little or no cost)

Unless income is low enough to qualify for assistance from the resident state, enrollees must pay a monthly premium to receive Part B services.  If modified adjusted gross income as reported on the enrollee’s IRS tax return 2 years ago was above a certain amount the enrollee may be required to pay more.

If yearly modified adjusted gross income in 2015 was:

File individual tax return File joint tax return File married & separate Monthly premium in 2017
$85,000 or less $170,000 or less $85,000 or less $134
Above $85000 up to $107,000 Above $170,000 up to $214,000 N/A $187.50
Above $107,000 up to $160,000 Above $214,000 up to $320,000 N/A $267.90
Above $160,00 up to $214,000 Above $320,000 up to $428,000 Above $85,000 up to $129,000 $348.30
Above $214,000 Above $428,000 Above $129,000 $428.60


In addition to the monthly premium the enrollee pays a share of the cost of most Part B service.  This amount is almost always 20% of the Medicare approved cost.

A person must be a U. S. citizen or be lawfully present in the U.S. to get Medicare-covered Part A and/or Part services.

Part A and Part B together form what is known as traditional or original Medicare.  The other parts make up fee-for-service Medicare.

The enrollee can decline Medicare B coverage if they have other health insurance that meets Medicare requirements.  If the other coverage is lost, he/she can enroll in Medicare Part B with no penalty if application is made on a timely basis.

Medicare Part C (Medicare Advantage):

Medicare Part C is also called fee-for service Medicare. This is a Health Maintenance Organization (HMO) type coverage.

  • Includes all benefits and services covered under Part A and Part B
  • Usually includes Medicare prescription drug coverage (Part D) as part of the plan
  • Run by Medicare-approved private insurance companies that follow rules set by Medicare
  • May include extra benefits and services for an extra cost

Medicare Part D (Medicare prescription drug coverage):

This is optional Medicare coverage and usually requires a premium.

  • Helps cover the cost of prescription drugs
  • Run by Medicare-approved private insurance companies that follow rules set by Medicare
  • May help lower prescription drug costs and help protect against higher costs in the future
  • Generally an HMO or PPO

Medicare Supplement Insurance (Medigap):

Original Medicare pays for many, but not all, health services and supplies.  Medicare Supplement Insurance policies, sold by private companies, can help pay some of the health care costs that traditional Medicare doesn’t cover, like copayments, coinsurance and deductibles.

Every Medigap policy must follow federal and state laws and must be clearly identified as “Medicare Supplement Insurance”.  Insurance companies can sell only a “standardized” policy.  All policies offer the same basic benefits, but some offer additional benefits so you can choose which one meets your needs.

  • The enrollee must have Part A and B
  • There are monthly premiums
  • Covers only one person
  • Can’t have prescription coverage in the Medigap plan and also have Part D
  • Costs can vary and may go up with age
  • Good all over the country when using doctors and other providers who accept Medicare payment

Posted in News

The Basics of a Dynasty Trust

With a properly executed estate plan, your wealth can be enjoyed by your children and even their children. But did you know that by using a dynasty trust you can extend the estate tax benefits for several generations, and perhaps indefinitely? A dynasty trust can protect your wealth from gift, estate and generation-skipping transfer (GST) taxes and help you leave a lasting legacy.

Dynasty trust in action

Transfers that skip a generation — such as gifts or bequests to grandchildren or other individuals two or more generations below you, as well as certain trust distributions — are generally considered to be GSTs and subject to the GST tax (on top of any applicable gift or estate tax). However, you can make GSTs up to the $5.49 million (in 2017) GST exemption free of GST tax.

Your contributions to a dynasty trust will be considered taxable gifts, but you can minimize or avoid gift taxes by applying your lifetime gift tax exemption — also $5.49 million in 2017.

After you fund the trust, the assets can grow and compound indefinitely. The trust makes distributions to your children, grandchildren and future descendants according to criteria you establish. So long as your beneficiaries don’t gain control over the trust, the undistributed assets will bypass their taxable estates.

Enhancing the benefits

To increase the benefit to future generations, you can structure the trust as a grantor trust so that you pay any taxes on the trust’s income. The assets will then be free to grow without being eroded by taxes (at least during your lifetime).

Also consider further leveraging your GST tax exemption by funding the dynasty trust with life insurance policies or property that’s expected to appreciate significantly in value. So long as your exemptions cover the value of your contributions, any future growth will be sheltered from GST tax, as well as gift and estate tax.

Is a dynasty trust right for you?

If establishing a lasting legacy is an estate planning goal, a dynasty trust may be the right vehicle for you. Even if an estate and GST tax repeal is passed as part of the GOP’s proposed tax reform legislation, the repeal might be only temporary. So this planning technique could still make sense. Before you take action, consult with Holbrook & Manter, because a dynasty trust can be complicated to set up. We’ll also keep you apprised of any legislative news regarding an estate and GST tax repeal.

Bonus depreciation – when is the right time to elect out of it?

By: Dave Herbe, CPA- Senior Accountant

Bonus depreciation (or as we tax geeks refer to it- Section 168 depreciation) can be a very beneficial thing for most businesses. Bonus depreciation can be taken on new assets placed in service in the current tax year. Bonus depreciation allows for an accelerated deduction of 50% of the assets original cost. This can lower your taxable income by a significant amount and save on taxes. However, there are some instances when electing out of bonus depreciation makes sense.

One of the biggest factors of electing out of bonus depreciation would be whether or not your company plans to make money for the year. If you are forecasting a loss for the current year, it may make sense to elect out of bonus. The reason that it makes sense is that in future years if you expect to be back in an income position, you can defer the depreciation expense into future tax years to help offset that income with additional depreciation expense. If you were to take the bonus depreciation in the year of the loss, it would only increase your loss and the benefit of the depreciation expense would be diminished in future years.

The entity type of the business also comes into play when determining if you should elect out of bonus depreciation or not. As a C-Corp there could be different impacts on your tax return versus that of a flow through entity (s-corps and partnerships). The impact on a flow through entity would be determined at the individual level. With individual returns, there could be factors from outside investments or income separate from the business entity that would go into determining if you should be electing out of bonus depreciation for qualifying assets.

This is a huge tax planning tool that can lead to significant tax dollar savings. The Holbrook and Manter tax team is very knowledgeable on this subject matter and can assist in any tax planning areas that you may need. Please contact us today.