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Emerging Accounting Markets


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Emerging Accounting Markets

  1. 1. January 2014  1 Follow on head on Master page A | 1-800-330-3772 | Growing surplus: Five burgeoning sectors for accountants By IBISWorld Industry Analyst Jeremy Edwards, exclusively for the AICPA conference Rising businesses activity on the heels of economic recovery will open up capacious pockets of growth for accountants Highercorporate profit will spur businesses to enlist accounting services In 2014, corporate profit is forecast to expand 5.0% as improving macroeconomic conditions precipitate stronger nationwide consumer demand. Rising consumer spending and low interest rates have contributed to favorable conditions for companies across the United States. Consequently, professional service providers, such as accountants, have benefited from the patronage of a growing pool of increasingly profitable businesses. The financial services sector represents the single-largest market for accounting professionals; however, growth has not been limited to traditional major markets. Various sectors experiencing strong growth have become emerging markets for accounting firms looking to generate new business in dynamic markets. Based on several factors affecting industries in these sectors, including new legislation, improving technology and growing internet penetration, IBISWorld has identified five sectors poised to offer new opportunities for accounting firms. Healthcare horizons The introduction of the Patient Protection and Affordable Care Act (PPACA) and phasing in of most major provisions in January 2014 has created strong growth opportunities for providers of healthcare and associated pharmaceutical products. According to the Obama administration, 8.0 million people had signed up for health insurance under the PPACA as of April 2014. Although this figure includes individuals previously covered through other provisions, it nevertheless represents an opportunity for professional service providers to cover Ambulatory Surgery Centers Generic Pharmaceutical Manufacturing Biotechnology Advertising Agencies Auto Parts Manufacturing Industry Growth SOURCE: WWW.IBISWORLD.COM 2009-14 % Growth 2014 % Growth 2014 Value ($m) 2019 Value ($m) 2014-19 % Growth 4.9% 6.8% 5.5% 1.4% 10.8% 11.8% 4.8% 3.2% 1.1% 4.8% $23,933.9 $42,673.7 $98,478.1 $34,442.0 $55,519.2 8.2% 4.8% 9.1% 3.1% 4.1% $36,797.6 $53,875.0 $152,434.7 $40,123.0 $67,801.8
  2. 2. November 2014  2 Growing surplus: Five burgeoning sectors for accountants a burgeoning sector. In fact, IBISWorld projects that the number of people with private health insurance will grow 4.5% to about $209.0 million in 2014, with additional 3.3% growth expected in 2015. Healthcare providers, such as those in the Emergency and Other Outpatient Care Centers industry (IBISWorld report 62149), are expected to experience stronger growth during the next five years, as more individuals are able to afford private healthcare. Illustrating this trend, the number of establishments in the Ambulatory Surgery Centers industry (IBISWorld report OD5971) is projected to grow an annualized 7.9% over the five years to 2019. Increasing and changing ambulatory surgery center (ASC) abilities, which will continue to be propelled by new surgical techniques, are expected to spur industry growth. Therefore, opportunities are ripe for accountants that provide audit and accounting services to new healthcare firms. Accountants will be able to assist with the processing of a growing amount of individuals expected to apply for treatment through a variety of health insurance plans. Additionally, accountants can help healthcare providers navigate new compliance regulations and understand required levels of insurance as these providers grow and take on more patients. Demand from hospitals and ASCs for accounting services is also anticipated to flow on to manufacturers of medical instruments and supplies. The implementation of PPACA provisions, coupled with an increasingly aging US population, are expected to contribute to growth in downstream healthcare manufacturing industries, thereby offering new business opportunities for accountants. For example, over the five years to 2019, the Medical Instrument and Supply Manufacturing industry (IBISWorld report 33911a) is forecast to grow at an average annual rate of 3.6% to $114.9 billion. Accountants can increasingly target operators in this industry through the provision of audit and internal controls, merger and acquisition advisory services and supply chain management consulting. Pharmaceutical potential In addition to healthcare services and medical equipment manufacturing, new opportunities exist for accounting professionals in the pharmaceutical manufacturing sector. Brand name manufacturers are forecast to increasingly invest in research and development (RD) to create new drugs and patents. Accountants can provide indications and timing of impairment for intangibles, create RD costs and assist in accounting amortization of product development. In addition, accounting professionals will be able to help measure the capitalization of development costs for generic drug manufacturers as well as provide general auditing and advisory services for both industries. However, upcoming patent expirations for several popular drugs, such as Abilify, a schizophrenia and bipolar disorder drug, and Copaxone, a treatment for multiple sclerosis, are forecast to limit growth in the Brand Name Pharmaceutical Manufacturing industry (IBISWorld report 32541a) and lead to higher growth for operators in the Generic Pharmaceutical Manufacturing industry (IBISWorld report 32541b). Biotechnology legislation and growth possibilities Stronger business conditions following the recession have resulted in surging corporate profit and, therefore, renewed RD spending. Biotechnology has been a key benefactor of rising RD expenditure; according to the OECD, the Biotechnology industry (IBISWorld report NN001) accounts for about 10.0% of total US business expenditure
  3. 3. November 2014  3 Growing surplus: Five burgeoning sectors for accountants on RD. This industry is a particularly attractive target for accountants looking to generate new business, due to new government legislation that will come into effect over the next five years. The PPACA is expected to provide tax breaks for smaller biotechnology companies and reduce costs associated with research and clinical trials. In addition, the Approval Pathway for Biosimilar Biological Products, which will permit biologics to maintain 12 years of market exclusivity, is expected to benefit the Biotechnology industry, following product approval from the Food and Drug Administration. Revenue for the Biotechnology industry is projected to increase an annualized 9.1% to $152.4 billion over the five years to 2019 and accountants will play a key role in helping young biotechnology businesses grow. Typically, smaller industry firms do not have the resources to perform their own accounting and financial functions, especially those grappling with difficult or changing regulations. Additionally, many biotechnology firms will seek out funding through either private sources or initial public offerings, for which companies’ generally require audit services to present financial information and analysis to potential investors. Additionally, accountants that are able to market their ability to help establish internal control systems and implement processes to handle company cash and liquid resources will successfully attract the businesses of small startup biotechnology companies seeking accounting advisory services. Digital media trending Despite the digital sector’s widespread market penetration over the past five years, many growth opportunities still exist in the digital market. The use of smartphones and other mobile internet connections, including all broadband internet-capable devices, is expected to grow at an average annual rate of 6.0% to 313.0 million users over the five years to 2019. Consumers are increasingly turning to smartphones and tablet devices to access content on the go. Therefore, industries with high levels of technological change and exposure to online systems offer major growth opportunities for accounting firms. According to a 2013 McKinsey Company survey, the percentage of companies positioning and branding material through online and offline channels rose from 31.0% in 2012 to 38.0% in 2013. Additionally, the percentage of companies using advanced customer targeting to advertise on a full-enterprise basis increased from 17.0% in 2012 to 30.0% in 2013. As a result, the number of firms in the Advertising Agencies industry (IBISWorld report 54181), many of which specialize in online and digital media, is forecast to expand over the next five years. Furthermore, larger firms looking to break into this rapidly growing sector will target many smaller industry operators as potential merger and acquisition (MA) material. Potential MA deals will provide growth opportunities for the provision of auditing and assurance services to produce accurate historical financial statements for potential purchasers. Moreover, the Video Games industry (IBISWorld report NN003) is also expected to grow due to the large number of smartphone games being released regularly, many of which target emerging demographics. For instance, according to Flurry, a mobile analytics firm, female mobile social gamers account for 53.0% of the market, compared with 40.0% for traditional video games. Consequently, significant growth opportunities exist for firms in this industry looking to capture new markets, while accounting firms can help developers secure funding. Furthermore, PwC’s 16th annual global
  4. 4. November 2014  4 Growing surplus: Five burgeoning sectors for accountants CEO survey revealed that 38.0% of CEOs in the entertainment and media sector consider new product and content development key methods for growing their businesses. Accounting professionals can assist video game developers and other online publishers with applicable international financial reporting standards pertaining to International Accounting Standards 2 and 38, which refer to inventories and intangible assets, respectively. Auto store aftermarkets Finally, significant growth opportunities for accountants have opened up within the automotive sector. Although US car manufacturers are finding it difficult to compete with international producers, who hold a competitive advantage with regard to lower wage and capital costs, auto aftermarkets are proving popular among US consumers. As a result, the Auto Parts Manufacturing industry (IBISWorld report 33639) is expected to expand, with industry revenue forecast to rise at an average annual rate of 4.1% to $67.8 billion over the five years to 2019. Growth will be largely due to greater consumer spending and the increasing popularity of ancillary automobile products. However, high transportation costs and a thinning difference between the cost of manufacturing domestically versus overseas is causing automotive aftermarket companies to consider whether to continue manufacturing abroad or to return certain product lines to the United States, a trend known as reshoring. Accounting firms can make inroads into the auto parts manufacturing sector through the provision of audit and assurance services, as well as detailed financial statements, which would include their cost of revenue in each market and whether changing production locations would be financially beneficial. Merger and acquisition activity also remains an option for operators to reduce costs through economies of scale and provides another line of business for accountants looking to enter the sector. About IBISWorld Inc. Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit or call 1-800-330-3772. Contact: Media Relations IBISWorld Sales Subscriptions Phone: 1-917-267-0351
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