The AICPA Business, Industry and Government Team hosted an infocast titled “Surviving the Economic Crisis: Credit and Operating Finance Issues and Solutions” on Dec. 18, 2008. Ken Witt, AICPA technical manager, Business, Industry and Government, moderated the event.

The presenters were Don Kluthe, CPA, president, Optimus Corporation and a member of the AICPA Business and Industry Executive Committee; and William (Bill) Pappas, partner, Parker Poe, who specializes in commercial financing transactions as well as governance and operational issues.

Witt began by first polling the audience, which consisted of a wide range of business and industry members, and asking how the credit-market crisis was impacting their operations. The results showed that 27% were experiencing problems with customer collections. Other problems identified by audience members include higher credit costs and more restrictive terms, and fewer available sources of financing.

Pappas then explained that the infocast’s theme was focused on business owners’ ability to evaluate risks they are encountering in today’s challenging environment and identify risks they have not experienced before. The infocast also focused on how business owners can manage those risks as a strategy for addressing credit and liquidity issues.

Kluthe further built on the infocast’s theme by emphasizing that “now is the time to perform a hard analysis: if the top line drops by 25%, what do we need to do? One approach is to scrutinize every line item on the financials and if headcount cost is significant, then evaluate every position.”

He also responded to an audience member who was concerned that businesses may be passing on opportunities due to the current credit crisis. Kluthe replied that there are opportunities for well-managed companies and these companies will take advantage of those opportunities. However, companies need to be fully informed of the risks and not jeopardize their financial position.

The following is an overview of topics covered during the infocast from two broad perspectives: credit-related issues and the effect of those issues on operations.

Crisis Financing Issues

Current Credit-Line and Financing Issues: limited credit availability; status of financial covenant compliance; possibility of rating changes and collateral call, rate increases or defaults; inability to issue public or private debt; and the impact on a borrower’s ability to fund cash needs
Long-Term Funding Concerns: impact on capital projects, M&A and other long-term investment expenditures
Equity and Debt-Financing Challenges: limited investment portfolio liquidity, potential problems accessing or liquidating investments, ownership of high-risk investments and mark-to-market issues
Possible Alternative Liquidity Sources: operating asset sales, equity investors, investment portfolio, and business partner and supplier

Other Liquidity-Related Operating Concerns

Enterprise Risk Management (ERM): re-assessment of risk management policies and processes, and sensitive areas that may warrant special attention
Working Capital and Credit Analysis: key customer and supplier concerns, impact on factoring arrangements, and changes in customer spending patterns
Insurance Concerns: effect on company’s key insurance providers, insurer’s ability to pay claims and company’s ability to obtain replacement-cost insurance at a reasonable cost
Other Planning Tools: business realignment, asset disposition and real estate management and ownership

The infocast also covered depressed stock prices, equity, debt-financing challenges, labor issues, operating agreements and dispute management.

To access this free archived infocast, go to: Surviving the Economic Crisis: Credit and Operating Finance Issues and Solutions.

The AICPA’s business, financial management and financial reporting resources offer additional guidance: www.cpa2biz.com/economy.

Did You Know FASB GAAP Codification Is Expected to Officially Launch on July 1, 2009?

The FASB Accounting Standards Codification™ will go live and become effective on July 1, 2009. The codification will become the single official source of authoritative U.S. accounting and reporting standards, other than guidance issued by the Securities and Exchange Commission. All other literature will be non-authoritative. This important new resource is part of the Financial Accounting Standards Board’s efforts to reduce the complexity of accounting standards and facilitate international convergence.

The codification was released by the FASB on Jan. 15, 2008, for a one-year verification period. During this period, users of U.S. GAAP had the opportunity to review the codification and submit their feedback electronically.

To prepare constituents for the change, the FASB has provided (1) online tutorials available on the codification Web site at asc.fasb.org, (2) a Notice to Constituents that includes a significant amount of background (also at asc.fasb.org) and (3) numerous presentations. In addition, the FASB has participated in various webcasts, including a webcast available in the FASB Webcast Series at www.fasb.org.

For more information, we have compiled a number of resources to help you understand the major shift that the codification represents. These resources are available here. You can also visit the codification Web site to learn more about FASB Accounting Standards Codification™.

Keeping Up with IFRS

On Nov. 14, 2008, the Securities and Exchange Commission published its roadmap for the adoption of International Financial Reporting Standards, which was previously announced on Aug. 27, 2008. The AICPA commented in a press release that adoption would “mark an important stage” in what “will be the eventual move from U.S. generally accepted accounting principles to international accounting standards for public companies.”

“The AICPA supports one set of high-quality global accounting standards for public companies,” said Barry Melancon, AICPA president and CEO. “We believe the capital markets ultimately will insist on IFRS for public companies.”

Where to Learn the Latest on IFRS

To help our members and other financial professionals learn about and keep current on IFRS, in mid-May 2008 we launched a Web site, www.ifrs.com. The Web site is a rich and reliable resource for CPAs to keep abreast of upcoming developments. In addition to an overview of the convergence of GAAP and IFRS in a newly revised AICPA backgrounder, IFRS.com offers many resources in various formats such as publications, CPE self-study and training, free videos, Q&As, and IFRS news and updates from the International Accounting Standards Board, SEC, Financial Accounting Standards Board and AICPA.

Comments Due Feb. 19 on IFRS Road Map Proposal

You can hear Arleen Thomas, CPA, AICPA senior vice-president, Member Competency and Development, present a two-minute report on the SEC’s IFRS road map proposal. The road map lays out milestones and a timeline for continuing progress toward adoption of IFRS for U.S. public companies starting in 2014. Comments are due Feb.19.

To help keep you up-to-date on important developments in the evolution towards international accounting standards, we have also developed the IFRS Report, which is a free, new monthly newsletter that brings you the top stories about accounting in our global marketplace. Register today for the IFRS Report at www.IFRS.com.

Upcoming Conferences: Save the Dates

Mark your calendars now for these upcoming conferences.

The Board and Audit Committee's Role in Risk Oversight: Taking a Strategic View of the Enterprise, Mar. 26-28, AICPA Boardroom, New York
AICPA International Business, Accounting, Auditing and Tax Conference, Apr. 30-May 1, Washington, D.C.
AICPA National CFO Conference (new conference), May 14-15, La Jolla, Calif.
AICPA Controllers Workshop—West, Jul. 21-22, Las Vegas
AICPA Controllers Workshop—East, Nov. 10-11, Orlando, Fla.

Get more information on 2009 conferences by clicking here.