SingerLewak Newsletter - February 2013

ASSURANCE & ADVISORY____________________________________________________________

Impairment Model for Credit Losses

TAX____________________________________________________________

Effect of New Tax Act on Charities

ENTERPRISE RISK

MANAGEMENT SERVICES____________________________________________________________

Spotlight on Your Bank Account... Yes, Your Bank Account

February 2013

From the Managing Partner

PASSION AND MOTIVATION:FUELING SUCCESS IN 2013

Contents

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FROM THE MANAGING PARTNER2 PASSION AND MOT IVAT ION: FUELING SUCCESS IN 2013

The beginning of the year is always a great time to make resolutions. For me, it is a time to roll out some of the plans that have been percolating, but which I never seem to have the time to execute. For some reason, a new year often symbolizes a new start and gives people the motivation to start new projects.

______________________________________________________________________________________________________________________________________________________

ASSURANCE & ADVISORY3 IMPAIRMENT MODEL FOR CREDIT LOSSES

With the convergence of IASB and FASB accounting, the FASB issued a proposed accounting standard update in December 2012, Financial Instruments-Credit Losses.

______________________________________________________________________________________________________________________________________________________

TAX5 EFFECT OF NE W TA X ACT ON CHARIT IES

The President signed into law the “American Taxpayer Relief Act of 2012” (“Act’) on January 3, 2013. In the months leading up to the Act, there had been a lot of discussion and anticipation in the charitable community about how charities will be affected by any changes in the law.

______________________________________________________________________________________________________________________________________________________

ENTERPRISE RISK MANAGEMENT SERVICES7 SPOTLIGHT ON YOUR BANK ACCOUNT. . .

YES, YOUR BANK ACCOUNTThere’s a race occurring daily and it’s as competitive as any competition imaginable. What’s at stake you ask? Your bank account. Cybercriminals are hard at work, chipping away at any form of protection you or your bank can throw at them.

February 2013

1 | SingerLewak February 2013

F R O M T H E M A N A G I N G PA R T N E R

The beginning of the year is always a great time to make resolutions. For me, it is a time to roll out some of the plans that have been percolating, but which I never seem to have the time to execute. For some reason, a new year often symbolizes a new start and gives people the motivation to start new projects. A new year can be time for hope, new begin-nings and opportunities. Now that we are into 2013 and have crossed the threshold, as well as recently celebrated the Chinese New Year, it is time to pull up some passion to fuel our motiva-tion for staying on course.

It brings to mind a popular Chinese proverb, which states, “Failure is not falling down, but refusing to get up.” It is one thing to see statistics about how the economy is suffering, but it is quite another when you are working side by side with a cli-ent, who has continued to tighten

their financial strings to keep their businesses alive. The one thing that strikes me is that these are people who are able to see opportunities and take advantage of them and have the passion for what they do to keep their mo-tivation strong. They do not see roadblocks as dead ends, but as obstacles that can be overcome. Through their enthusiasm and tireless efforts, they continue to reinvent themselves and not allow themselves to be victims. They position themselves for luck and growth.

It is a good reminder to me that I am at a Firm that allows me to make a difference, to apply my passion for what I do, and have it translate to the work we do with clients, as they go through the normal cycles of any growing business. Despite the challenges of the past few years, it has given me insight into why some com-panies succeed and others don’t. At the end of the day, it is all about the people, their attitude and their motivation.

February 2013 SingerLewak | 2

PASSION AND MOTIVATION:FUELING SUCCESS IN 2013BY JIM PITRAT | MANAGING [email protected] | 310.477.3924

JIM PITRAT CAN BE REACHED AT [email protected]

OR 310.477.3924

3 | SingerLewak February 2013

A S S U R A N C E & A DV I S O RY

IMPAIRMENT MODEL FOR CREDIT LOSSESBY SUZIE DORAN | [email protected] | 310.477.3924

SUMMARY:

With the convergence of IASB and FASB accounting, the FASB issued a proposed accounting standard update in December 2012, Financial Instruments-Credit Losses. This proposed standard will address the recogni-tion of credit losses on financial instruments based on expected losses rather than on an incurred-loss impairment model.

SCOPE:

The proposed guidance would apply to all entities on account-ing for credit losses on debt securities, trade receivables, lease receivables and loan commit-ments.

APPLICATION:

For each reporting period, an al-lowance would be established for all expected credit losses on debt instruments. Rather than waiting for a triggering event, recognition of a credit loss would be based on if a loss is expected by the next fiscal year or there is a significant deterioration in credit. In calcu-

lating an estimate of expected credit losses, quantitative and qualitative factors would need to be considered, such as current conditions and forecasts specific to the entity. The allowance will also need to be adjusted for the time value of money.

The income statement would also reflect the amount of credit loss or reversal required to adjust the balance sheet allowance for expected credit losses as of the end of the reporting period. Ac-crual of interest income would cease when it is not probable that the principal or interest will not be paid. When the carrying amount has been reduced to zero, any additional amounts would be recognized as recoveries of amounts previously written off

with any excess recognized as interest income.

When it is determined that there is no reasonable expectation of future recovery, the cost basis of a financial asset would be directly reduced. The allowance would be reduced by this amount. Recov-ery of any previously written off

Rather than waiting for a triggering event,

recognition of a credit loss would be based on if a

loss is expected by the next fiscal year or there is a

significant deterioration in credit. In calculating an

estimate of expected credit losses, quantitative and

qualitative factors would need to be considered,

such as current conditions and forecasts specific to

the entity.

February 2013 SingerLewak | 4

amounts would be recognized with an adjustment to the al-lowance when consideration is received.

FINANCIAL STATEMENT PRESENTATION:

Financial assets would need to reflect the estimate of any al-lowances on the balance sheet. Expanded disclosures proposed would significantly expand the amount of disclosure related to the credit quality, factors used to determine the allowance for expected credit losses, and ad-ditional tabular formats that include rolling forward changes and reconciling fair value to the amortized cost.

EFFECTIVE DATE:

As the proposed draft was issued in December 2012, it is too early to determine when a final draft will be issued. Accordingly, no specific effective date has been proposed.

Expanded disclosures proposed would

significantly expand the amount of disclosure related to the credit

quality, factors used to determine the allowance for expected credit losses, and additional tabular

formats that include rolling forward changes

and reconciling fair value to the amortized cost.

SUZIE DORAN CAN BE REACHED AT

[email protected] OR 310.477.3924

5 | SingerLewak February 2013

TA X

The President signed into law the “American Taxpayer Relief Act of 2012” (“Act’) on January 3, 2013. In the months leading up to the Act, there had been a lot of discussion and anticipation in the charitable community about how charities will be affected by any changes in the law. The following are two key provisions contained in the Act that could have a direct impact on charitable dona-tions made to charities:

• For taxable years beginning after December 31, 2012, the limitation on itemized deduc-tions has been reinstated for individual taxpayers with a threshold of $300,000 for joint filers and surviving spouses, $275,000 for heads of household, $250,000 for single filers and $150,000 for married taxpayers filing sepa-rately. For taxpayers with tax-able income exceeding these thresholds, the total amount of their itemized deductions is reduced by 3% of the amount by which the taxpayer’s Ad-justed Gross Income exceeds the threshold amount, but the

reduction cannot exceed 80% of the otherwise allowable itemized deduction. What this means for chari-ties – while these reinstated limitations will undoubtedly present some challenges for charities in securing future contributions, the continua-tion of the charitable contribu-tion deduction is a welcomed departure after last year’s dis-cussions about the possibility of eliminating the tax benefit altogether.

• For taxable years 2012 and 2013, individuals 70½ years or older may continue to make tax-free distributions from their Individual Retirement

Account (‘IRA”) to public charities in amounts up to $100,000 per taxpayer, per taxable year. The Act contains two elections that enable its retroactive application to 2012:

- A taxpayer may elect to treat a distribution that he or she made in January 2013 as if it

EFFECT OF NEW TAX ACT ON CHARITIESBY NANAZ BENYAMINI | SENIOR [email protected] | 310.477.3924

What this means for charities – while these reinstated limitations

will undoubtedly present some challenges for charities in securing future contributions,

the continuation of the charitable contribution deduction is a welcomed departure after last year’s

discussions about the possibility of eliminating the tax benefit altogether.

February 2013 SingerLewak | 6

was made on December 31, 2012, thereby allowing the deduction to be reported on a 2012 tax return.

- A taxpayer who has already received an IRA distribu-tion in December 2012 may still elect to transfer the IRA distribution that he or she received to a public charity and treat the amount as a tax-free distribution from their IRA as long as the tax-payer transfers the cash to the charity prior to February 1, 2013.

This provision allows charities additional time to solicit chari-table contributions from poten-tial donors who are interested in applying their charitable distribu-tion to their 2012 tax year by way of their IRA account.

This provision allows charities additional

time to solicit charitable contributions from

potential donors who are interested in applying their

charitable distribution to their 2012 tax year by way of their IRA account.

NANAZ BENYAMINI CAN BE REACHED AT

[email protected] OR 310.477.3924

E N T E R P R I S E R I S K M A N AG E M E N T S E R V I C E S

There’s a race occurring daily and it’s as competitive as any compe-tition imaginable. What’s at stake you ask? Your bank account. Cybercriminals are hard at work, chipping away at any form of protection you or your bank can throw at them.

It’s all in the numbers...the bad guys get as many attempts as they want and the bank only has to fail once before millions can be lost and just as many accounts are compromised. The attack-ers have the advantage, and they know it.

Think you’re too small of a fish to be a target? New data suggests that cyber attacks aimed at small

businesses have doubled over the past six months. According to Symantec, 36% of all targeted attacks during the last six months were directed at businesses with 250 or fewer employees.

How are they doing it? With your help! Whether it’s a website you visit or an email attachment you’ve opened, the Internet is littered with botnet-creating, information-stealing Trojans. A Trojan is a small program that first infects your computer and then sends information from infected computers to remote servers.

When thousands of copies of a

Trojan have been installed on computers all over the Internet, you get a network of machines under the remote control of a cybercriminal — known as a botnet. The reason this method has proven to be so successful for the bad guys is that the owners of the infected machines usually aren’t even aware that anything wrong is happening.

One recent story on how quickly things can go awry occurred on July 10th when crooks who’d broken into the computers of a fuel supplier in southern Geor-gia attempted to transfer $1.67

According to Symantec, 36% of all targeted

attacks during the last six months were directed at businesses with 250 or

fewer employees.

SPOTLIGHT ON YOUR BANK ACCOUNT... YES, YOUR BANK ACCOUNTBY RICK MARK | SERVICE AREA [email protected]

7 | SingerLewak February 2013

How are they doing it? With your help! Whether

it’s a website you visit or an email attachment

you’ve opened, the Internet is littered with botnet-creating, information-

stealing Trojans.

million out of the company’s accounts. When that failed, they put through a fraudulent payroll batch totaling $317,000, which the victim’s bank allowed. Shortly after the dust settled, the victimized company hired an outside forensics firm to investi-gate, and found that the trouble started on July 9, when the firm’s controller clicked a link embed-ded in an image in an email designed to look as though it was sent by the U.S. Postal Service.

Criminals are using these botnets to perform a whole slew of mali-cious internet activities. Whether it’s mounting distributed denial-of-service (DDoS) attacks or sending out spam emails, like anyone else, they’re after the money. Banking Trojan botnets

are used specifically to snag login credentials to online bank ac-counts and payment processors such as PayPal.

While banks are constantly refin-ing online account security by coming up with new methods for authenticating users, there are still steps you can take as well. Getting to know what’s coming into your network is one thing, but what’s being sent out of it is another. Many of these botnets report from very specific and known areas of the world and internet addresses. Having a fire-wall block incoming traffic can’t help when a Trojan is injected into a system. Most networks do not filter proactively or on a regu-lar basis, for outgoing traffic and connections to the botnet servers.

In business, it’s often about the bottom line. There are criminals out there trying to attack yours...what are you doing to protect it? If you have concerns about secu-rity threats in general, and want more information about how to check your network for these threats, and then how to effec-tively ‘curb the trojan appetite’, email us at [email protected] and we’ll be happy to help.

February 2013 SingerLewak | 8

RICK MARK CAN BE REACHED AT [email protected]

OR 818.251.1323

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