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CONSTRUCTION
INDUSTRY TECHNICAL
UPDATE
D A V I D B L A I N
L I S A W H I T E , C PA
M I C H A E L H O F F N E R , C PA
FRAUD ENGAGEMENT
FROM A TO Z
S A M U E L B O W E R C R A F T , M S I S , C I S A
&
D A V I D H A M M A R B E R G ,
C P A ,...
CONSTRUCTION
INDUSTRY TECHNICAL
UPDATE
D A V I D B L A I N
L I S A W H I T E , C PA
M I C H A E L H O F F N E R , C PA
David Blain
• Principal
• Assurance & Advisory
• Construction
• Manufacturing
MEET THE PRESENTERS
Lisa White
• Senior Mana...
CONSTRUCTION
ECONOMIC TRENDS
S
DAVID BLAIN
KEY ECONOMIC INDICATORS
• Confindex Quarterly Reading
• Architecture Billing Index (ABI)
• FMI Construction Outlook Report...
MACRO INDUSTRY ANALYSIS
• Each economic indicator has varying results
• Overall, the mood and climate for the construction...
CONFINDEX QUARTERLY READING
• CONFINDEX is a leading economic indicator of the health of
commercial construction in the US...
• The overall CONFINDEX fell 0.8% during
the second quarter from 129 to 128
• The index is up 3.2% from a year ago
• Resul...
ARCHITECTURE BILLING INDEX (ABI)
• The Architecture Billing Index (ABI) is produced by The American Institute of
Architect...
• ABI continues in growth mode
• June ABI score was 51.6, down from a
mark of 52.9 in May
• The new projects inquiry index...
FMI CONSTRUCTION OUTLOOK REPORT
• FMI is the largest provider of management consulting and
investment banking services to ...
FMI CONSTRUCTION OUTLOOK REPORT, CONT.
• Annual CPIP predictions Shrink to $913 billion from $918
billion in Q1 2013.
• Al...
ENR CONSTRUCTION INDUSTRY CONFIDENCE INDEX (CICI)
• The CICI measures executive sentiment about the current market and
ref...
• The second-quarter 2013 CICI rose to a
record 69 points on a scale of 100, which
represents a growing market.
• Virtuall...
ASSOCIATED BUILDERS AND CONTRACTORS
CONSTRUCTION BACKLOG INDICATOR (CBI)
• CBI is a forward-looking national economic indi...
• CBI declined 1.1 percent during the first
quarter of 2013 and now stands at 7.9
months.
• CBI is still 7 percent higher ...
TAX UPDATE
S
LISA WHITE, CPA
ORDINARY INCOME RATES
Tax Brackets from the Bush tax cut made permanent:
• 10%, 15%, 25%, 28%, 33%, and 35%
Added 39.6% be...
CAPITAL GAIN AND QUALIFIED DIVIDEND RATES
Beginning in 2013
• Two lowest tax brackets (10% and 15%) pay 0%
• Those in the ...
FIXED ASSETS & DEPRECIATION
Section 168(k) “Bonus” Depreciation Extended for a Year
• 50% of qualifying assets
• Auto limi...
FIXED ASSETS & DEPRECIATION (CONT.)
Section 179 Deduction extended for a year
• Maximum deduction - $500,000, with phase-o...
BUSINESS TAX CREDITS
New Markets Tax Credits (NMTC) extended through 2013
• $3.5 billion in funds to be awarded for 2012 a...
BUSINESS TAX CREDITS (CONT.)
Research & Development (R&D) Credit Extended Through 2013
• 20% Credit on the sum of the net ...
BUSINESS TAX CREDITS (CONT.)
Energy Credits
• 10% Credit on the basis of the energy property (geothermal and combined heat...
OTHER ITEMS
Shortened built-in gains holding period extended for a year
• Reverts back to 10-year holding period
Repair vs...
AFFORDABLE CARE ACT – THE 2013 IMPACT
Applies to Individuals, Estates, and Trusts
Thresholds, AGI greater than:
• $250,000...
AFFORDABLE CARE ACT – THE 2013 IMPACT (CONT.)
3.8% Net Investment Income Tax (Form 8960)
• Net investment income:
• Intere...
ACCOUNTING TECHNICAL
UPDATE
S
MICHAEL HOFFNER, CPA
TECHNICAL UPDATE
ASU 2013-02 Comprehensive Income
• Requires reporting of amounts reclassified OUT of AOCI
• Effective for...
TECHNICAL UPDATE
ASU 2012-02 Intangibles – Goodwill and Other
• Allows an entity to make a qualitative assessment regardin...
TECHNICAL UPDATE | PROPOSED ASU – LEASES
Revisions
• Revised proposed ASU issued May 16th, 2013, revising the 2010 exposur...
TECHNICAL UPDATE | PROPOSED ASU – LEASES
(continued)
Significant considerations
• Lessees will need to recognize assets an...
TECHNICAL UPDATE | PROPOSED ASU – LEASES
(continued)
Guidance
• All guidance will need applied to all leases existing as o...
TECHNICAL UPDATE | PROPOSED ASU – REVENUE RECOGNITION
Revenue Recognition Update
• Final standard expected Q3 2013 (finall...
TECHNICAL UPDATE | PROPOSED ASU – REVENUE RECOGNITION
(continued)
Summary of Key Changes Impacting Construction
• Bad Debt...
TECHNICAL UPDATE | PROPOSED ASU – REVENUE RECOGNITION
(continued)
Summary of Key Changes Impacting Construction
• Loss Pro...
TECHNICAL UPDATE | PROPOSED ASU – REVENUE RECOGNITION
(continued)
Steps in Proposed/Expected Model
• Identify the contract...
TECHNICAL UPDATE
Private Company Accounting
• AICPA issued Financial Reporting Framework for Small and Medium Sized Entiti...
FRAUD ENGAGEMENT
FROM A TO Z
S A M U E L B O W E R C R A F T , M S I S , C I S A
&
D A V I D H A M M A R B E R G ,
C P A ,...
McKonly & Asbury Webinar - Construction Industry Technical Update 2013
McKonly & Asbury Webinar - Construction Industry Technical Update 2013
McKonly & Asbury Webinar - Construction Industry Technical Update 2013
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McKonly & Asbury Webinar - Construction Industry Technical Update 2013

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We continued our Celebrating 40 Years of Excellence! Webinar Series with a webinar focusing on giving a Construction Industry Technical Update, presented by Michael Hoffner, Partner; David Blain, Principal; and Lisa White, Senior Manager with McKonly & Asbury.

We focused on recent accounting and tax changes impacting the construction industry and also covered upcoming accounting guidance changes with revenue recognition and other related topics. We then provided guidance to new federal and state tax legislation that will impact contractors.

Check out our Upcoming Events page for news and updates on our future seminars and webinars at http://www.macpas.com/events/.

View a full recap of this webinar at http://www.macpas.com/mckonly-asburys-free-construction-industry-technical-update-webinar.

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  • Short term lease – maximum possible term of 12 months or less including any option to renew or extend. Rent free periods included in this assessment. Must be applied consistently by asset class
  • Recognition of revenue over time would be required if:The performance creates or enhances an asset that the customer controls; The customer receives and consumes the benefits as performance takes place, and the work completed would not need to be substantially reperformed by a new vendor if the contract was terminated; or The asset created does not have an alternative use, the contract specifies a right to payment for performance completed to date, and the contract is expected to be fulfilled as promised.
  • Transcript of "McKonly & Asbury Webinar - Construction Industry Technical Update 2013"

    1. 1. CONSTRUCTION INDUSTRY TECHNICAL UPDATE D A V I D B L A I N L I S A W H I T E , C PA M I C H A E L H O F F N E R , C PA
    2. 2. FRAUD ENGAGEMENT FROM A TO Z S A M U E L B O W E R C R A F T , M S I S , C I S A & D A V I D H A M M A R B E R G , C P A , C F E , C I S S P , M C S E , W X Y Z
    3. 3. CONSTRUCTION INDUSTRY TECHNICAL UPDATE D A V I D B L A I N L I S A W H I T E , C PA M I C H A E L H O F F N E R , C PA
    4. 4. David Blain • Principal • Assurance & Advisory • Construction • Manufacturing MEET THE PRESENTERS Lisa White • Senior Manager • Tax • Construction • Real Estate Michael Hoffner • Partner • Assurance & Advisory • Construction • Manufacturing • Quality Control
    5. 5. CONSTRUCTION ECONOMIC TRENDS S DAVID BLAIN
    6. 6. KEY ECONOMIC INDICATORS • Confindex Quarterly Reading • Architecture Billing Index (ABI) • FMI Construction Outlook Report • ENR Construction Industry Confidence Index • Associated Builders and Contractors Construction Backlog Indicator (CBI)
    7. 7. MACRO INDUSTRY ANALYSIS • Each economic indicator has varying results • Overall, the mood and climate for the construction industry appears to be moving in a positive direction • Results do appear to vary by industry and region of the country • Long-term outlook for the construction industry continues to show slow and steady growth through 2014 and into 2015.
    8. 8. CONFINDEX QUARTERLY READING • CONFINDEX is a leading economic indicator of the health of commercial construction in the US. • CONFINDEX is CFMA's proprietary confidence index survey of CFOs in the commercial construction sector. • Survey consist of 300 randomly selected CFMA General Members with the title of CFO in commercial construction companies
    9. 9. • The overall CONFINDEX fell 0.8% during the second quarter from 129 to 128 • The index is up 3.2% from a year ago • Results are consistent with expectations for continued gradual construction industry recovery CONFINDEX QUARTERLY READING, CONT.
    10. 10. ARCHITECTURE BILLING INDEX (ABI) • The Architecture Billing Index (ABI) is produced by The American Institute of Architects (AIA) • The ABI is an economic indicator that reflects the approximate nine to twelve month lag time between architecture billings and construction spending • The monthly ABI index scores are centered around 50, with scores above 50 indicating an aggregate increase in billings, and scores below 50 indicating a decline in billings
    11. 11. • ABI continues in growth mode • June ABI score was 51.6, down from a mark of 52.9 in May • The new projects inquiry index was 62.6, up sharply from the reading of 59.1 the previous month • Sector index breakdown • Commercial / Industrial (54.7) • Multi-Family Residential (54.0) • Mixed Practice (52.4) • Institutional (51.8) ARCHITECTURE BILLING INDEX, CONT.
    12. 12. FMI CONSTRUCTION OUTLOOK REPORT • FMI is the largest provider of management consulting and investment banking services to the engineering and construction industry • The report details Construction Put In Place (CPIP) in three residential building, 11 nonresidential building and five non-building structure categories.
    13. 13. FMI CONSTRUCTION OUTLOOK REPORT, CONT. • Annual CPIP predictions Shrink to $913 billion from $918 billion in Q1 2013. • Although prediction is down from Q1 2013, overall growth is 7% from 2012. • FMI does expect growth to return to 8% growth in 2014 with annual CPIP reaching $989 billion
    14. 14. ENR CONSTRUCTION INDUSTRY CONFIDENCE INDEX (CICI) • The CICI measures executive sentiment about the current market and reflects their views on where it will be in the next three to six months and over a 12- to 18-month period. • The index is based on responses to surveys sent out to more than 3,000 U.S. firms on ENR's lists of the leading contractors, subcontractors and design firms. • The latest results are based on a survey conducted from May 30 to June 10.
    15. 15. • The second-quarter 2013 CICI rose to a record 69 points on a scale of 100, which represents a growing market. • Virtually all the market sectors measured by the CICI are now in growth mode. • For the first time, all market sectors had a CICI rating over 50, indicating expected market growth over the next 18 months. ENR CONSTRUCTION INDUSTRY CONFIDENCE INDEX (CICI), CONT.
    16. 16. ASSOCIATED BUILDERS AND CONTRACTORS CONSTRUCTION BACKLOG INDICATOR (CBI) • CBI is a forward-looking national economic indicator that reflects the amount of work that will be performed by commercial and industrial contractors in the months ahead • Focused on the U.S. commercial and institutional, industrial, and infrastructure construction industries. • CBI is measured in months and reflects the amount of commercial and industrial construction work under contract, but not yet completed
    17. 17. • CBI declined 1.1 percent during the first quarter of 2013 and now stands at 7.9 months. • CBI is still 7 percent higher compared to one year ago. • Infrastructure continues to be associated with the lengthiest construction backlog. ASSOCIATED BUILDERS AND CONTRACTORS CONSTRUCTION BACKLOG INDICATOR (CBI)
    18. 18. TAX UPDATE S LISA WHITE, CPA
    19. 19. ORDINARY INCOME RATES Tax Brackets from the Bush tax cut made permanent: • 10%, 15%, 25%, 28%, 33%, and 35% Added 39.6% beginning in 2013 – thresholds are: • $450,000 for married-filing-jointly and surviving spouses • $425,000 for head-of-households • $400,000 for singles • $225,000 for married-filing-separately
    20. 20. CAPITAL GAIN AND QUALIFIED DIVIDEND RATES Beginning in 2013 • Two lowest tax brackets (10% and 15%) pay 0% • Those in the 25% - 35% bracket pay 15% • Those in the highest bracket (39.6%) pay 20% • NOTE – these rates do not include the 3.8% surtax
    21. 21. FIXED ASSETS & DEPRECIATION Section 168(k) “Bonus” Depreciation Extended for a Year • 50% of qualifying assets • Auto limit increased by $8,000 • Bonus depreciation *not* required to be included in percentage-complete calculation for property with recovery period of seven years or less • 2010 Bonus Depreciation excluded • 2011 Bonus Depreciation included • 2012 Bonus Depreciation included • 2013 Bonus Depreciation excluded
    22. 22. FIXED ASSETS & DEPRECIATION (CONT.) Section 179 Deduction extended for a year • Maximum deduction - $500,000, with phase-out limit of $2 million • Beginning in 2014, maximum deduction reverts back to $25,000/$200,000 Qualified leasehold improvements, qualified restaurant property, and qualified retail space improvements, favorable treatment extended for a year • 15 year straight-line depreciation • Eligible for “Bonus” depreciation • Section 179 deduction of $250,000
    23. 23. BUSINESS TAX CREDITS New Markets Tax Credits (NMTC) extended through 2013 • $3.5 billion in funds to be awarded for 2012 and 2013 • 39% Credit of the original investment amount earned over a seven-year period • 5% for first three years; 6% for remaining four years Low-Income Community Eligibility Listing • Listing of Certified CDEs (as of August 2012) and Eligible Locale Listing • http://www.novoco.com/new_markets/resource_files/cde/cde_bystate_080212.pdf • http://www.cdfifund.gov/what_we_do/acs/update-census-data.asp • View our website recap article for links
    24. 24. BUSINESS TAX CREDITS (CONT.) Research & Development (R&D) Credit Extended Through 2013 • 20% Credit on the sum of the net qualified research expenses, basic research payments, and expenses related to an energy research consortium for energy research. Rehabilitation Investment Credit • 10% Credit on the basis in the qualified rehabilitated building – 20% if building is a certified historical structure. Low-Income Housing Credit • 9% Rehabilitation tax credit rate for allocations during 2013.
    25. 25. BUSINESS TAX CREDITS (CONT.) Energy Credits • 10% Credit on the basis of the energy property (geothermal and combined heat and power system property) – 30% for solar Work Opportunity Credit extended through 2013 • 40% of qualified first-year wages (up to $6,000 per employee) for certified workers who work at least 400 hours; 25% for certified workers who work at least 120 hours • Qualified veterans: cap on qualified first-year wages increases to 12,000 – 24,000. • Summer employees: max credit: 1,200 per employee (40% of 3,000 cap on wages)
    26. 26. OTHER ITEMS Shortened built-in gains holding period extended for a year • Reverts back to 10-year holding period Repair vs. Capitalization, new regulations begin in 2014 • Unit of property • De minimis / materials and supplies • Write-off structual components as they are replaced • Change in accounting method
    27. 27. AFFORDABLE CARE ACT – THE 2013 IMPACT Applies to Individuals, Estates, and Trusts Thresholds, AGI greater than: • $250,000 married-filing-jointly • $125,000 married-filing-separately • $200,000 all others Could be subject to both taxes, but not on the same income
    28. 28. AFFORDABLE CARE ACT – THE 2013 IMPACT (CONT.) 3.8% Net Investment Income Tax (Form 8960) • Net investment income: • Interest, dividends, annuities, royalties, rents, and capital gains. • “… unless those items are derived in the ordinary course of a trade or business…” Additional 0.9% Medicare Tax: • Note: Employers must withhold additional tax from wages in excess of $200,000, without regard to person’s filing status.
    29. 29. ACCOUNTING TECHNICAL UPDATE S MICHAEL HOFFNER, CPA
    30. 30. TECHNICAL UPDATE ASU 2013-02 Comprehensive Income • Requires reporting of amounts reclassified OUT of AOCI • Effective for nonpublic entities fiscal years beginning after 12/15/2013 ASU 2013-07 Presentation of Financial Statements • Clarifies when an entity should apply the liquidation basis of accounting, and provides guidance on recognition and measurement of assets and liabilities under this basis • Effective for periods beginning after 12/15/2013
    31. 31. TECHNICAL UPDATE ASU 2012-02 Intangibles – Goodwill and Other • Allows an entity to make a qualitative assessment regarding whether an indefinite-lived intangible may be impaired before determining fair value • Effective for impairment tests performed for fiscal years beginning after 9/15/2012 NOTE: Many others issued in 2012/2013 – previous only highlights 3 believed more relevant to audience
    32. 32. TECHNICAL UPDATE | PROPOSED ASU – LEASES Revisions • Revised proposed ASU issued May 16th, 2013, revising the 2010 exposure draft to reflect many of the comments and concerns heard Many changes from the 2010 exposure draft, including: • Dual model for lessees and lessors • Higher threshold for consideration of extension options • Simplified consideration of variable lease payments • New concepts to consider in determining of a contract contains a lease
    33. 33. TECHNICAL UPDATE | PROPOSED ASU – LEASES (continued) Significant considerations • Lessees will need to recognize assets and liabilities, other than certain short-term leases, on the balance sheet. Like previous draft, the lessee records a lease liability and a right- of-use asset. • Exposure Draft contains guidance on calculating the initial lease liability and right-of-use asset • Accounting by lessor dependant on whether the lessee is expected to consume “more than an insignificant portion” of the economic benefits embedded in the underlying asset
    34. 34. TECHNICAL UPDATE | PROPOSED ASU – LEASES (continued) Guidance • All guidance will need applied to all leases existing as of the beginning of the earliest comparative period presented. Final Standard • Final standard expected in 2014, effective date at least 3 years out from the final standard.
    35. 35. TECHNICAL UPDATE | PROPOSED ASU – REVENUE RECOGNITION Revenue Recognition Update • Final standard expected Q3 2013 (finally!) • After redeliberations in late 2012 and early 2013, many original decisions affirmed, however several changes in areas related to construction. Most of these areas are considered improved for the industry • Overall, expectation that new model will yield similar results as current model for many contracts
    36. 36. TECHNICAL UPDATE | PROPOSED ASU – REVENUE RECOGNITION (continued) Summary of Key Changes Impacting Construction • Bad Debt – impairments from customer receivables should be an expense on the statement of comprehensive income • Uninstalled Materials – final standard will include language to assist in determining how uninstalled materials will impact cost-to-cost calculations • Variable Consideration (claims, etc) – revenue only recognized up to the amount that should not be subject to future reversals
    37. 37. TECHNICAL UPDATE | PROPOSED ASU – REVENUE RECOGNITION (continued) Summary of Key Changes Impacting Construction • Loss Provisions – existing guidance will be retained • Effective Date – effective for annual reporting periods BEGINNING on or after 1/1/2018 for nonpublic entities • Transition method: • Retrospective basis, or • Practical expedient approach wherein a cumulative effect to opening retaining earnings will “catch up” all existing contracts rather than restating comparative years
    38. 38. TECHNICAL UPDATE | PROPOSED ASU – REVENUE RECOGNITION (continued) Steps in Proposed/Expected Model • Identify the contract with a customer • Identify separate performance obligations in the contract • Determine the transaction price • Allocate transaction price to separate performance obligations • Recognize revenue when (as) the performance obligation is satisfied
    39. 39. TECHNICAL UPDATE Private Company Accounting • AICPA issued Financial Reporting Framework for Small and Medium Sized Entities • Special purpose framework for entities NOT required to follow GAAP (an Other Comprehensive Basis) • FASB issued 3 exposure drafts related to Private Company Council on specific alternatives to current GAAP • Basic interest rate swaps, recognizing and measuring intangible assets other than goodwill, and subsequent measurement of goodwill (comments due this month)
    40. 40. FRAUD ENGAGEMENT FROM A TO Z S A M U E L B O W E R C R A F T , M S I S , C I S A & D A V I D H A M M A R B E R G , C P A , C F E , C I S S P , M C S E , W X Y Z

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