Tax Act Spurs Overhaul in Popular Desk Manual

Special to Journal of Accountancy from CPA2Biz

The Economic Growth and Tax Relief Reconciliation Act of 2001 is forcing a major update to The Accountant’s Business Manual, an AICPA publication issued in hardcopy and, soon on CD-ROM.

William H. Behrenfeld, JD, LLM, CPA, one of the two main preparers of the manual, revised —or more accurately, overhauled —the gift and estate planning chapters.

“Because of the new tax law we’ve had to make major changes to the estate planning and trust chapters,” Behrenfeld said shortly before the revisions were released. “The changes in the law are quite confusing.”

The Accountant’s Business Manual
by William H. Behrenfeld, JD, LLM, CPA, and Andrew R. Biebl, CPA

Accountant’s Business Manual has proven to be a dependable complete “quick answer book” on a wide array of business, legal, tax and financial questions.

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AICPA reSOURCE Online
Online professional reference library containing AICPA’s professional standards, technical practice aids, financial reporting trends and standard setting guidance

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AICPA eMAP
Management of an Accounting Practice Handbook Online

AICPA InfoBytes
700 online CPE courses

Learn2 Library
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AICPA National Leadership Summit
May 2–3, 2002,
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Featuring famed management guru Tom Peters in a six-hour session

TECH 2002—Computer and Technology Conference
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The changes, Behrenfeld said, make it rather difficult for the practitioner to help clients plan beyond 2010, when the act takes full effect. The act is already set to be repealed in 2011.

Each year, beginning in 2002, the amount exempt from the estate tax will increase, gradually rising from $1 million to $3.5 million in 2010, after which the amount returns to the level of 2002. Meanwhile, the gift tax exemption goes in its own direction, rising to $1 million in 2002 and remaining level until 2010.

The manual is generally technical but also tries to reflect the mutability of certain business areas. Behrenfeld, who is the author of “The Estate Planning Desk Book,” advises tax planners to “remain flexible.”

“It’s really a crazy situation,” Behrenfeld said. “You really can’t plan beyond 2010 with any feeling of assurance that this is where we’re going.”

To help meet the changing needs of the profession, CPA2Biz offers a broad array of AICPA products and services. The CPE, conferences, publications and software that members are used to getting from the AICPA are now available at CPA2Biz, along with a wide selection of new products, services, technical resources, business solutions, news and tools. Find more at www.cpa2biz.com, or toll-free at (888) 777-7077.

Special to Journal of Accountancy from CPA2Biz

CPA valuators are increasingly finding that clients are asking for more than just a final number in their estimates. Instead, the market is pushing CPAs for a more holistic approach. And CPAs are responding with a new school of practice called real options theory.

“Real options theory is connected more to operational or corporate theories, as opposed to the financial aspects of the investing arena,” explains Steven E. Sacks, a CPA and the CPA2Biz senior product manager in charge of BV issues. “Heretofore, the recognized valuation methods have been inadequate for forecasting revenue streams and have completely ignored the opportunities management can avail themselves of through different courses of action.”

“CPAs must serve in a more consultative role to provide a value. . . You can’t just compute for it.”

— Steven Sacks, CPA

These different courses of action can result in a difference between the price of a business as measured by the stock market value and the intrinsic value, a concept typically used by financial analysts, explains Sacks, who was an advocate of the BV mission at the AICPA long before joining CPA2Biz.

Take some real world examples: Time Warner’s merger with AOL to expand its distribution network via an online environment. Yahoo!’s decision to extend its portal services into the Internet auction business. Or, eBay’s purchase of Half.com and Butterfield & Butterfield.

CPA2Biz Inc. has launched the Business Valuation Resource Center, stocked with the AICPA resources and industry expertise that CPAs need to tackle this demanding discipline. The center offers insights for CPAs involved in business transactions, mergers, acquisitions, economic damages, bankruptcy, reorganization or fraud.

The center also provides solutions for CPAs with the Accredited in Business Valuation credential.

Selected BV Resources

The Value Reporting Revolution: Moving Beyond the Earnings Game

By Robert G. Eccles, Robert H. Herz, E. Mary Keegan, David M.H. Phillips
(Product Number 010020)

Valuation: What Are Assets Really Worth?

By Alfred M. King (Product Number WI349836P010D)

Litigation Services Handbook: The Role of the Financial Expert

By Roman L. Weil, Michael J. Wagner, Peter B. Frank (Product Number WI403091P0100D)

A CPA’s Guide to Valuing a Closely Held Business

By Gary R. Trugman, CPA/ABV, MCBA, ASA, MVS
(Product Number 056601)

To get some idea of how much “real option” value the market is assigning a given company at a given price, discounted cash flow is used to derive a price for a company’s existing business, explains Sacks. This value is then compared to market value. The larger the discrepancy between the market value and discounted cash flow, the larger the market is likely assigning the real options available to the company.

“CPAs must serve in a more consultative role to really provide a value,” Sacks says. “You can’t just compute for it.”

The CPA valuator provides true value—beyond the numbers—by blending valuation expertise with an entrepreneurial approach. The practice offers the business owner alternative courses of action, which can bridge the gap between current market perception and current value.

It goes beyond mere formulas, providing, instead, real value for the client through operations insights and financial analysis.

“It does not stop at a business valuation report,” Sacks says, “but leads to a call for action. This is how CPA valuators will separate themselves from competition in the future.”