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CPA

Are You Ready for the FASB Accounting Standards Update (ASU) No. 2014-09?

By | Abila, Accounting, Audit, CPA, FASB, Nonprofit | No Comments

By now you’ve probably heard of FASB Topic 606. This is an accounting standards update that seeks to provide greater clarity to organizations on how to report revenue. After the initial release of the update, several clarification statements have been issued to help organizations and companies prepare for the new guidelines. As you’re getting ready to implement the new standards (they go into effect for certain not for profits starting December 15, 2017, and for most others December 15, 2018), it’s important to understand both the gist of the update as well as the clarifying statements that have been issued.

What Is FASB Topic 606?

FASB 606 deals with revenue from contracts with customers. FASB Accounting Standards Update No. 2014-09 seeks to streamline statement preparation, as well as provide better disclosure to the public and to others. Clear, transparent reporting is essential for nonprofits; it helps build trust between nonprofits and their constituents. With FASB Topic 606 and Accounting Standards Update No. 2014-09, the revised guidelines are intended to help nonprofits clearly disclose their relationship with their customers and the revenues such relationships and contracts provide.

Another reporting area that FASB No. 2014-09 seeks to improve is the ability for people to compare financial statements. If revenue is reported differently, it makes it harder to compare them across entities. If revenues follow a consistent reporting pattern, they can be compared more easily.

Clarifications on the Original Statement

Accounting professionals charged with the implementation of this revised standard have asked for, and received, clarification on several items. First, intellectual property issues required several clarifying statements. Organizations who license their IP needed information on how to record revenues. A nonprofit health association, for example, who licenses a special ‘badge’ that packaged food companies can put on their products to indicate they meet specific dietary guidelines needs to understand whether they should record revenues at once or over time as they occur.

So far, FASB has issued four clarifications:

  1. ASU No. 2016-08, which addressed principal versus agent considerations.
  2. ASU No. 2016-10 identified performance obligations and licensing
  3. ASU No. 2016-12, clarified a narrow scope improvements and practical expedients directed at items such as the reporting of noncash consideration, contract modification and completed contracts at transition, collectability matters, and similar matters.
  4. ASU No. 2016-20 which correct loan guarantees, contract costs—impairment testing, and provision for losses on construction-type and production-type contracts. Because this area is so complex, interested people should keep up to date with any further changes on 2016-20.

Caution: Implementation Ahead

With all of the clarifications and updates, it’s difficult to say whether or not organizations are truly ready to implement the new rule. Although many indicate that they are, it may be wishful thinking.

A few other cautions have come above. The new rule indicates that transaction prices should be allocated to each performance obligation based on the stand-alone price. Software companies are paying particular note of this requirement since it may accelerate revenue recognition for their products.

Another area where this may impact revenue recognition is on bundled items. Revenue recognition for bundled, package items may now be considered one item instead of many.

Lastly, revenues must be recorded when it appears probable that they can be collected. For nonprofits, this means that they cannot record as donations or revenues money left to them with conditions attached unless it becomes very clear that those conditions will be met.

Confused? Let Welter Consulting Help

If you’re confused about all the FASB changes and the implementation of these new guidelines, Welter Consulting can help. Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact Welter Consulting at 206-605-3113 for more information.

What You Need to Know About Nonprofit Payroll Taxes

By | Accounting, Audit, CPA, MIP Fund Accounting, Nonprofit | No Comments

Keeping abreast of payroll taxes can be difficult, but nonprofit payroll taxes can be especially challenging. Some nonprofit organizations mistakenly think that obtaining the tax-exempt status exempts them from recording and paying all payroll taxes. The truth may be more nuanced and complicated than that, with variances according to worker status and more. Get the facts about nonprofit payroll taxes in order to maintain compliance with local, state, and federal law.

Need help setting up or processing payroll in your Abila MIP Fund Accounting™ system? Join us for our hands on training event, Payroll in MIP.”

Nonprofit Payroll Taxes: Tax Status

Tax exempt status is obtained by completing the appropriate forms and receiving notification from the IRS that it has been granted to a nonprofit organization. This is a federal tax exemption and not a blanket exemption from paying all taxes. That’s an important distinction.

You may be exempt from paying federal corporate income taxes, but your employees must still pay their payroll taxes. Social Security and Medicare taxes are also not exempt and are important contributions that must be made and recorded to remain compliant with the law.

FUTA Taxes

The IRS states that “Religious, educational, scientific, charitable and other organizations described in section 501(c)(3) and exempt from tax under section 501(a) are not subject to FUTA tax and do not have to file form 940.” You must receive and keep on file a designation from the IRS.

States, however, can have different rules from the federal ones, so you may be required to pay taxes on the state level. Check with your state taxation department or your accounting firm to determine state taxation requirements.

FICA Taxes

Like for-profit corporations, nonprofits are required to pay employment taxes on compensation to employees. There are a few exceptions to this which include:

  • Churches and some religious organizations can elect an exemption from FICA (Social Security and Medicare).
  • Ministers and other members of the clergy or religious organizations can exempt certain services from FICA taxes.
  • FICA compensation paid to students may be excluded.

 

Volunteer Compensation

By the nature of volunteer work, it is usually uncompensated time. However, many nonprofits give gifts to volunteers. Small gifts of appreciation such as an award plaque are usually untaxed, but major gifts such as gift cards, gift certificates and any gifts of significant value may be subject to taxes. Generally speaking, non-cash gift items with token value only or sentimental value aren’t taxed, but anything that can be construed as cash or the equivalent of, like a gift certificate, may be taxed.

Who Is In Charge?

Who is on the hook if mistakes are made on taxation? You may be surprised to learn that it is the Board of Directors. The Board has ultimate oversight on all financial matters, and that includes taxes paid. If mistakes are made, the responsibility lies with the Board.

Board members should be aware of this requirement and take precautions to ensure that all employment taxes are paid accordingly. Reviewing this information with your nonprofit’s accounting and financial management staff is vital to ensure compliance.

Although it may seem, by virtue of being a nonprofit organization, you should not have to pay any taxes, there are still some which might need to be paid. A bit of research now and prudent oversight from your Board can ensure that you are in good standing with federal and state taxation laws.

Welter Consulting

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact Welter Consulting at 206-605-3113 for more information.

You Can Never Be Too Careful: Improving Computer Security

By | Accounting, CPA, Data, HR, MIP Fund Accounting, Nonprofit | No Comments

Cyber threats are on the rise worldwide. The costs of a data breach are staggering with the average cost to repair such breaches at $4 million. And if you think your nonprofit organization is too small to be affected by cybercrimes, data breaches, viruses, and ransomware think again: many of the worst threats are to individuals and small businesses and that includes small nonprofit organizations.

One of the areas most vulnerable to external cyber threats is communications. Contact forms on websites, emails, chats, images – all provide a window into your systems through which cyber criminals can enter to wreak havoc. Here’s how you can improve the security of your overall system with an eye towards shoring up the defenses of your communications network.

Questions to Ask – and Answer

The first step to solving any problem is to understand the full scope of the problem itself. To do this, you will need to evaluate all of the possible threats against your organization. Review security and access points including who has access to your systems, website, email server, social media accounts and any external software you may use such as cloud-based storage, file sharing, and other systems.

  • Do you have a written process for granting access and revoking privileges? A written process with a designated administrator controls access to key services and systems. You can detail who can access which systems and what to do when someone’s employment is terminated or they leave voluntarily.
  • Do you have a master list of all of your software and systems? Create a list of all of the software and systems, as well as administrators and contact people in your organization, for all of the software you use.
  • Do you have a process in place for updating your software? Those annoying popups prompting you to update your systems aren’t just for show. Software updates close gaps in the system that programmers find after the initial software releases. These “patches” are often important coding changes that defend against known threats. Regular updates of all of your software and operating systems are
  • Do you have virus protection in place? A virus protection program can screen websites to ensure they are safe and check inbound emails and attachments. Other types of virus programs scan your hard drive for malware, harmless but annoying programs, and other code that gets injected into your computer without your knowledge. It’s smart to have two packages rather than just one; two can often catch more than one.
  • Do you back up your systems regularly? In the event of a cyber attack, having backups ready to restore your systems is vital. Automatic backups can be installed or you can store some of your non-confidential files on a cloud server to keep copies safe.

Communications Security Tips

In addition to these questions and answers, consider a few other security measures to put into place.

  • Assume anyone, at any time, can read your emails. Do not share passwords or other confidential information by email.
  • Consider email encryption services, which encrypt email on your computer so that it can only be read by the sender and recipient.
  • Only open attachments from people you know.
  • Require two-step authentication to sensitive systems and accounts such as bank accounts.

If you’ve checked “yes” to many of these items, then congratulations – you’re ahead of many other nonprofits in the cyber security department.

One last step is to have an emergency plan on hand to restore critical systems in the event an attack cripples your nonprofit’s systems. The FBI virus, a form of ransomware, can infect computers merely through visiting an infected website and it is difficult to remove. It locks a computer so that you cannot use it until the ransom is paid to the criminal. A skilled computer technician or service can remove it but will cost both time and money.

This is just one example of possible threats. As the threats grow, having a backup plan and a plan to keep working while your systems are fixed is critical to keeping your doors open and your work continuing without pause.

Welter Consulting

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact Welter Consulting at 206-605-3113 for more information.

Tips and Tricks: Finding and Using Advanced Smartphone Calculator Apps

By | Accounting, Audit, Budget, CPA, Nonprofit | No Comments

How did any of us manage our businesses without smartphones? Today’s smartphones act like portable computers with more computing power in these tiny handheld gadgets then people a decade or two ago could imagine. For the busy CPA on the go, a smartphone offers a great portable computer that can

perform many tasks while you’re traveling, working from a client’s office, or trying to sneak in a bit of work between innings at your child’s Little League game.

One important app that no CPA’s smartphone should be without is a calculator app. We’re not talking about the simple apps that come with your smartphone, great though they may be. We’re talking about apps that pack the power punch a CPA needs for advanced number crunching.

Let’s take a look at some tips and tricks for finding and using advanced smartphone calculator apps. Before downloading any app, check to make sure it is compatible with your particular make and model of phone.

Android Compatible Calculator Apps

* One++ offers 245 calculating options that cover more than the basic needs of the average CPA. Unit conversations, basic and advanced math, capitalization ratios, depreciation, and much more are all available. Best of all, it can be voice activated, so it can find formula prompts for you with verbal commands. It can recognize 12 languages, so if you’re traveling and need to share it with another CPA, you’re covered too. It’s a great tool available from many of the Android Shops online, and it’s FREE.

* Mobi: Mobi offers two choices of calculators, a free version, and a very minimally priced paid version. The free version is just a step up from basic, but Mobi Calculator Pro, the paid version, offers great features for a CPA. The paid version features include expressions, formulas and highly advanced calculators. The app includes a memory function that enables you to recall the past 50 calculations, so if you make a mistake you can backtrack and find it. It also allows you to save your work.

* Wolfram Alpha: For less than what a latte costs, Wolfram Alpha offers a wealth of tools for financial advisors, CPAs, and others involved in the world of accounting, investments, and financial management. Data and research on stocks, indexes, mortgage value, present value, depreciation and other issues are included, and the tool can also perform advanced research for many financial queries. Wolfram Alpha also has an iOS version compatible with iPhones.

iOS Apps

* Soulver: For a small cost, you’ve got an amazing smartphone app for your iOS compatible products. Soulver includes columnar formatted calculations that are editable. You can also create currency conversions and perform unit conversions.

* Tydlig: Talk about a spreadsheet on the go – or on your phone, that is Tydlig. It combines a calculator with spreadsheet-style functions to build your own accounting canvas. Add labels to graphs and charts, calculate formulas, and export your work to a PDF to print back at the office. It’s a great portable accounting app if you travel a lot and need to conduct some work on the fly. For the amount of a candy bar, it may be a great investment for your productivity.

To find a great calculator app for your needs, review these and other compatible apps using any free trials offered. At these prices, however, you don’t need to pinch pennies. You can try one or several for a while and see which one feels right for your business needs.

With so many CPAs traveling for business, working remotely, or working during their mass transit commutes, calculator apps such as these offer great productivity tools.

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. We offer hands-on training as well as webinars to take you to the next level with your fund accounting system. Check out the full schedule of our training events here.