We believe in creating a strong working relationship with our clients to determine their specific accounting and compliance needs.

H&M Team Holds Holiday Toy Drive for Nationwide Children’s Hospital

For the past several weeks, H&M team members have been collecting toys to donate to Nationwide Children’s Hospital in Columbus.

In the spirit of the holidays, toys for children of all ages were brought to our various office locations.  It was fun to watch the pile of donations grow. From Legos to fidget spinners…. art supplies to puzzles…. dolls to board games…. it is the hope of our team that these gifts will bring joy to the kids that must spend the holiday season in the hospital.

The friendly staff at Nationwide Children’s Hospital greeted our H&M elves who did the toy delivery. They were excited to take a look at the items we brought for the patients and were so gracious and appreciative. However, the pleasure was all ours.

The H&M Family wishes you and your family a very happy holiday season, and a blessed and happy new year.

 

 

 

 

Address your Pet in your Estate Plan Using a Pet Trust

If you’re an animal lover, a pet is a member of the family — sometimes even more so than flesh-and-blood. So you want to ensure that your beloved pet is cared for after you’re gone. One way to do so is to make provisions for your pet through a trust.

This legally sanctioned arrangement allows you to set aside funds for the animal’s care. After the pet dies, any remaining funds are distributed among your heirs as directed by the trust’s terms.

Pet trust in action

The basic guidelines are comparable to trusts for people. You, as the grantor, create the trust to take effect either during your lifetime or at death. Typically, a trustee will hold property for the benefit of your pet. Payments to a designated caregiver are made on a regular basis.

Depending on the state in which the trust is established, it terminates upon the death of the pet or after 21 years, whichever occurs first. Some states allow a pet trust to continue past the 21-year term if the animal remains alive. This can be beneficial for pets that have longer life expectancies than cats and dogs, such as parrots and turtles.

Include specific instructions

Because you know your pet better than anyone else, you may provide specific instructions for his or her care and maintenance (for example, a specific veterinarian or brand of food). The trust can also mandate periodic visits to the vet and other obligations should you become unable to care for the pet yourself. If you have questions on how to address your pet in your estate plan, please contact Holbrook & Manter.

The Basics of Directors and Officers Insurance

By: Shannon Robinson, CPA- Senior Accountant

Have you ever wanted to serve on a non-profit board but you did not for fear that you would make a mistake? Organizations often purchase Directors and Officers (D&O) Insurance to assist them in attracting competent professionals to serve on their boards without fear of personal financial loss. Even though the insurance is for the sole benefit of the directors and officers, the organization usually pays for it.     

Directors and Officers Insurance generally provides coverage for any actual or alleged act or omission, error, misstatement, neglect, or breach of duty.  D&O Insurance provides reimbursement for losses in the event an insured suffers such a loss as a result of a legal action brought for alleged wrongful acts in their capacity as directors and officers.  Note that intentional legal acts or fraud are typically not covered under directors and officers policies.

D&O Insurance Policies can be structured to meet the interest of each organization based on their risk appetite and coverage needs. Polices usually cost less than most organizations think they do. Premiums can range from as low as $1,000 or less for a small non-profit organization to $15,000 for a small public company, and up to $100,000 or more for a large company.

If you are thinking about serving on a board ask the organization if they have directors and officers coverage as this may set your mind at ease and make your decision easier.  Please contact us with any questions you may have.

Are you Ready for Revenue Recognition

As the effective date of the Financial Accounting Standards Board’s new revenue recognition standard approaches, there’s increasing pressure on companies and/or their audit committees to assess their companies’ implementation efforts. For the very large publicly traded companies, the new standard will apply to annual reporting periods beginning after December 15, 2017 (including interim periods) whereas it is effective for calendar year private companies on January 1, 2019.  However, understanding the new standard and evaluating its impact is a very complex undertaking in order to understand the over 1,000 pages outlining this new standard.

The Center for Audit Quality (CAQ) has published Preparing for the New Revenue Recognition Standard: A Tool for Audit Committees to help committees fulfill their oversight responsibilities. The publication is organized into the following four sections:

 

1.) A new revenue recognition model

Accounting Standards Update No. (ASU) 2014-09, Revenue from Contracts with

Customers, established a new core principle for revenue recognition “to depict the

transfer of promised goods or services to customers in an amount that reflects the

consideration to which the entity expects to be entitled in exchange for those goods or

services.” It created a model for recognizing revenue:

 

-Identify the contract (s) with the customer.

- Identify the contract’s separate performance obligations.

- Determine the transaction price, using extra scrutiny if a contract calls for variable consideration, such as bonuses, incentives, rebates or penalties.

- Allocate the transaction price to the contract’s performance obligations, if there are multiple performance obligations.

- Recognize revenue when (or ad) the entity satisfies a performance obligation (that is, when the customer obtains control of the good or service).

 

The need to identify separate performance obligations — distinct promises to transfer

goods or services — is critical. To make the transition to the new standard, companies

may elect full retrospective application — which requires prior-period financial

statements to be recast — or modified retrospective application — which doesn’t require

recasting, but does require the cumulative effect of initially applying the standard to be

recorded as of the initial application date.

 

2. Impact assessment

This section assists audit committees in evaluating management’s assessment of how the

new standard will affect the company. For some companies, the amount and timing of

revenue recognized under the new standard won’t differ significantly from their results

under current U.S. Generally Accepted Accounting Principles. But audit committees will

still need to make the analysis under the new standard’s requirements to reach that

conclusion. In addition, all companies will be affected by the new standard’s disclosure

requirements, regardless of its impact on revenue. The new rules expand disclosure

requirements and require qualitative and quantitative disclosures intended to provide

information about a company’s contracts with customers. The disclosures must include

information about revenue and cash flow stemming from such contracts.

The audit committee should look at how the standard’s impact was assessed and who was

involved in the assessment. In addition, determine what company-specific factors were

considered and when management will provide pro-forma financial statements that

illustrate the expected impact. Finally, review how the company’s external auditor views

the assessment.

When making the assessment, it’s important to seek input from a wide range of

departments, including accounting, tax, financial reporting, financial planning and

analysis, investor relations, treasury, sales, legal, information technology and human

resources. The CAQ also urges audit committees to ask management about the standard’s

potential impact on specific aspects of the company’s business. (See “How will the new

standard affect your company’s revenue?”)

 

3. The implementation plan

This section helps audit committees understand and assess management’s implementation

plan. It provides detailed questions audit committees should ask on such subjects as

project milestones, progress reports, external auditor and third-party vendor views,

adequacy of resources, qualifications of the accounting team, accounting policy and

significant accounting judgments, systems and controls, and company culture.

 

 4. Other implementation considerations

The final section covers other considerations, including deciding on a transition

approach, handling dual recordkeeping requirements for retrospective application,

determining whether to consider early adoption and complying with new disclosure

requirements.

 

The publication also includes a list of articles, technical guides and other resources for

navigating the implementation process.

By now, public companies should have made substantial progress toward implementing

the new revenue recognition standard. The CAQ’s publication can help audit committees

evaluate the status of their companies’ implementation efforts and, if necessary,

accelerate the process. Please reach out to H&M with any questions or concerns you may have.

Bah Humbug! The Ghost of Taxable Income for Christmas Presents May Come to Haunt You and Your Employees This Holiday Season

By: Mark Rhea, J.D.- Senior Assistant Accountant

During the Holiday Season, many employers want to show appreciation for their employees and the hard work they have done all year by giving presents. Some people might not think twice about doing something nice for their employees, but Treasury rules and regulations can turn that generosity into a potential headache for both employers and employees.

For example, let’s assume that the owner of Scrooge Enterprises, Ebenezer, decides that he wants to spread holiday cheer by giving each one of his employees a copy of his favorite movie “A Christmas Carol.” He has two options to accomplish this. The first is that he purchases copies of “A Christmas Carol” DVDs at $20 per DVD and gives those copies to his employees. The second is that he purchases $20 gift cards to the same store where he would have bought the DVDs.

If Ebenezer decides that he wants to go to the store and purchase the DVDs himself and give those gifts to his employees, the IRS would not treat those gifts as income to his employees and the IRS would permit Ebenezer to fully deduct the cost of those DVDs as the $20 spent per DVD would likely be considered a “de minimis fringe benefit” holiday gift with a “low fair market value.” See Treasury Reg § 1.132-6(e)(1). However, if Ebenezer decides to purchase gift cards in the amount of $20 to the same store that he would have bought the DVDs and gives those gift cards to his employees so they can go to the store and purchase “A Christmas Carol” on their own, the IRS would consider that gift card a cash equivalent and therefore must be reported as income and subject to employment taxes. Cash or cash equivalents, no matter how small, are never considered a “de minimis fringe benefit” excludable as income. See Treasury Reg § 1.132-6(c).

Ebenezer should take comfort in the fact that he can still treat his employees to a holiday cocktail party or meal at his favorite establishment as “occasional” cocktail parties and group meals are still considered “de minimis fringe benefits.” See See Treasury Reg § 1.132-6(e)(1). However, if Ebenezer decides to buy his employees gift cards to his favorite establishment instead of taking his employees there himself, the IRS again would find that those gift cards would be cash equivalents and treated as income subject to employment taxes.

There are many regulations and rules governing the giving of gifts to employees not just during the holidays, but year-round and for special situations such as employee awards and retirements. Holbrook & Manter is prepared to help you answer any questions regarding your generosity with your employees. Happy Holidays!

Selecting a Guardian for your Minor Children

If you have minor children, arguably the most important estate planning decision you have to make is choosing a guardian for them should the unthinkable occur. It’s critical to put much thought into this decision to ensure your children would be cared for as you wish in such a situation.

Evaluating potential candidates

Here are a few issues to consider when evaluating potential guardians:

  • Do they want to serve as guardians?
  • Does your estate plan provide sufficient resources so that caring for your children won’t cause an economic hardship?
  • Do they share your values and parenting philosophy?
  • If they’re married, is the marriage stable?
  • If they have children, do your children get along with them?
  • How old are they in relation to the children? A grandparent or other older person may not be the best choice to care for an infant or toddler, for example.
  • Are their homes large enough to make room for your children?

Keep in mind that a court’s obligation is to do what’s in the best interest of your children. The court isn’t bound by your guardian appointment but will generally honor your choice unless there’s a compelling reason not to. It’s a good idea to prepare a letter explaining the reasons you believe your appointees are best equipped to care for your children.

Naming others

It’s also important to choose a backup guardian. Why? If your first choice dies or is unable or unwilling to serve for some other reason, a court will appoint a guardian, and you likely wish to provide some guidance on that as well.

Your estate plan should list anyone you wish to prevent from raising your children. Contact us for more information regarding estate planning for parents with minor children. Contact Holbrook & Manter today for more information about the role your accountant should play in your estate planning.

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.