Daphnie Munoz Becomes WNDE’s 19th Partner

January 18, 2012 Category: Uncategorized [ No Comments ]

White Nelson Diehl Evans LLP is pleased to announce that Daphnie Munoz has been named the company’s 19^th partner.  Munoz is a key figure in the firm’s government audit practice.

“Daphnie is a talented professional who does outstanding work on behalf of our clients,” observed Dave Doran, Managing Partner.  “We’re pleased she’ll be able to continue these duties as a partner of our firm.”

Munoz earned her B.S. degree in accounting from De La Salle University in Manila in 1995.  She earned her CPA designation in 2001.  Munoz passed her CPA exam on her first attempt at a time when passage rates were low.

She joined Diehl Evans (which merged with White Nelson earlier this year) in 1998.  Her most recent position was senior manager, in which she specialized in both tax and audit work.

Munoz looks forward to continuing her service to the firm, remarking, “I like the work environment and interacting with our clients.”

She lives with husband Joe in Fullerton.  They have two sons, Cole, 2, and Kyle, 1.

Types of Financial Statements

January 18, 2012 Category: Uncategorized [ No Comments ]

By BRIAN P. WILTERINK, CPA, Partner, White Nelson Diehl Evans LLP

When CPAs prepare or assist in preparing financial statements, they are required under professional standards to issue a report on those financial statements.  This report can be one of three types:

• Audit report
• Review report
• Compilation report

The type of report is determined by mutual agreement between the client and the CPA.  This determination usually depends on many factors, such as the needs of the client, needs of creditors or investors, the size and complexity of the business, and other factors.  Securities laws require all publicly held enterprises to provide annual audited financial statements, while privately held companies often opt for reviewed or compiled statements.  Or, credit agreements with lenders may require audited statements, even for private companies.  Additionally, audited financial statements are often beneficial in a business disposition or acquisition.

Regardless of the level of service performed by the CPA, the financial statements are the primary responsibility of the reporting entity.

WNDE is experienced in performing audits, reviews, and compilations for entities of all kinds and sizes.  This experience can be placed at your disposal.

A COMPARISON

Compiled Financial Statements represent the most basic level of service CPAs provide with respect to financial statements.  In a compilation, the CPA must comply with certain basic requirements of professional standards, such as having a knowledge of the client’s industry and applicable accounting principles, having a clear understanding with the client as to the services to be provided, and reading the financial statements to determine whether there are any obvious departures from generally accepted accounting principles (or, in some cases, another comprehensive basis of accounting used by the entity).  It may be necessary for the CPA to perform “other accounting services” – such as creating your general ledger, or assisting you with adjusting entries for your books – before the financial statements can be prepared.  Upon completion, a report on the financial statements is issued that states a compilation was performed in accordance with AICPA professional standards, but no assurance is expressed that the statements are in conformity with generally accepted accounting principles.  This is known as the expression of “no assurance.”  Compiled financial statements are often prepared for privately held entities that do not need a higher level of assurance expressed by the CPA.

Reviewed Statements require that the CPA perform inquiry and analytical procedures in addition to the procedures described above for a compilation.  Upon completion, a report is issued stating that a review has been performed in accordance with AICPA professional standards, that a review is less in scope than an audit, and that the CPA did not become aware of any material modifications that should be made in order for the statements to be in conformity with generally accepted accounting principles, or if applicable, another comprehensive basis of accounting.  This is known as the expression of “limited assurance.”  Reviewed financial statements are often prepared for entities that have bank loans, outside investors, or trade creditors, but those third parties do not require audited statements.

Audited Financial Statements are the product of a CPA’s highest level of assurance services.  In an audit, the CPA performs all of the steps indicated above regarding compiled or reviewed statements, but also performs verification and substantiation procedures.  These verification and substantiation procedures may include direct correspondence with creditors or debtors to verify details of amounts owed, physical inspection of inventories or investment securities, inspection of minutes and contracts, and other similar steps.  Also, the CPA gains a knowledge and understanding of the entity’s system of internal control.  When the audit is completed, the CPA’s standard audit report states that an audit was performed in accordance with generally accepted auditing standards, and expresses an opinion that the financial statements present fairly the entity’s financial position and results of operations.  This is known as the expression of “positive assurance.”

AUDIT VS. REVIEW

There are significant differences between the objectives of an audit of financial statements in accordance with generally accepted auditing standards and the objectives of a review in accordance with statements on standards for accounting and review services.  The objective of an audit is to provide a reasonable basis for expressing an opinion regarding the financial statements taken as a whole.  A review does not provide a basis for the expression of such an opinion because a review does not contemplate obtaining an understanding of the internal control structure or assess control risk, tests of accounting records and of responses to inquiries by obtaining corroborating evidential matter through inspection, observation or confirmation, and certain other procedures ordinarily performed during an audit.  A review may bring to the accountant’s attention significant matters affecting the financial statements, but it does not provide assurance that the accountant will become aware of all significant matters that would be disclosed in an audit.

The following link provides a comparison of the procedures performed in audit, review and compilation engagements:

http://www.whitenelson.com/uploads/Levels_of_Attestation.pdf

If you would like more information or would like to discuss your needs, contact us for a free consultation.

Selling Business? First Max your Value

January 18, 2012 Category: Uncategorized [ No Comments ]

When the economy went south, mergers and acquisitions went along with it, with near-record lows in 2008 and 2009.  But as the recovery sputters to life, 2010 featured a significant uptick in M&A activity, highlighted by a standout performance in the U.S. middle market, where growth in the deal count and dollar market exceeded 50 percent.  Key M&A variables remain as positive as we move forward in 2011, according to the most recent report from Robert W. Baird.  We have seen a healthy rise in local transactions.  Companies are implementing growth plans, with acquisitions a top priority for many.

The downside for sellers is that it’s a buyer’s market.

If you are like many recession-weary companies, you may be highly motivated to sell.  That motivation can sometimes lead to hasty sales decisions that prevent you from realizing your organization’s full value.  As you watch the uptick in the sale of companies this year, remember your goal must be to maximize proceeds.

Too many companies are unprepared for the complexities of this process.  A successful transaction requires careful preparation and due diligence from both sides.  For sellers, it also requires active involvement in the process from day one to help drive the deal and ensure successful integration.

PREPARING YOUR COMPANY FOR SALE

As you enter the selling process, remember: The time you invest in the sale usually equates to greater returns at closing.  Before you begin fielding offers, get your company in the best shape possible.  It’s a valuable exercise that attracts buyers and yields higher returns.

• Get your house in order.  Begin by taking a close look at your business — the way a potential buyer would.  This can be more challenging than it sounds.  A thorough self-assessment should help you articulate the positive aspects your company brings to the table besides cash flow.
• A good place to start is looking for cost-cutting opportunities.  It’s to your advantage to operate a lean organization, so improve efficiencies and eliminate waste.
• Clean up your financial statements and consider conducting an audit.  Collect old receivables and write off any uncollectible accounts.  As you review financials, spend time creating a realistic valuation of your company.  While you should aim for the highest possible price, research what comparable companies have sold for.
• Today’s buyers are sophisticated, and they require complete and detailed documentation about your business.  Preparing it from the buyer’s perspective can help create a foundation for your company’s value, which will help you get a better price.
• Get a good adviser.  Because selling can be the most important event in the life of your company, it’s critical to have an experienced M&A adviser in your corner — before it is up for sale.  The right professional can help you navigate complexities and identify a buyer who represents the best fit and the highest price.
• An experienced adviser can help negotiate the deal’s nonfinancial terms, such as your employees’ future, your ongoing role in the business, non-competes and earn-outs. They can help develop an exit plan and determine the best timing and implications for your sale, which are key in an uncertain marketplace.
• Determine the right type of buyer.  The best buyers for your company may be unknown to you. They must have both the means to pay what your business is worth and the motivation to see the deal through.  They also should have some strategic goal for acquiring your company, such as tapping into a new market or eliminating a competitor.  Understand the buyer’s motives, and you will be at an advantage when it comes to maximizing proceeds from the sale.
• Have alternative buyers.  With only one, you run the risk of weakening your negotiating position and giving up control over the transaction.  More than one buyer in the process broadens your options and creates a more competitive environment.  A buyer that bears consideration is a financial buyer, such as a private equity group.  It will likely offer less money than a company seeking a strategic acquisition, but is often ready to move more quickly.  Depending on the seller’s situation, a financial buyer may be the only option.  If you have not worked with this type of investor, bringing in an adviser who is experienced in negotiating with private equity firms is imperative.
• Demonstrate your value.  Avoid the temptation to set a price for your business too early.  Focus on what the buyer values most about your business, whether it’s a new product or service, geographic expansion or human capital.  This approach puts you in a better position to document value and negotiate a higher price.

If buyers are focused too much on past performance, they may undervalue your business.  Help them see the future value of your business with analysis and documentation of your earning potential.  Align this documentation with the strategic goals your buyer has in mind.

DRIVING THE INTEGRATION PROCESS

You’ve agreed to sell your company.  The deal has been struck, and due diligence is underway.  Your buyers have likely been putting together an integration plan since they first identified you as a target.

Integration is the key to success or failure of any acquisition for the buyer.  As the seller, if you have a stake in the deal afterward, jump in now.  Buyers are interested in speed — getting integration completed so they can begin to enjoy the acquisition’s expected benefits.  If the sale has an earn-out for the seller, speed is important for you as well, because you likely won’t hit the targets if integration fails.  Moreover, your and your employees’ future roles can be dramatically impacted by the integration plan.

One of the keys to success is assembling an integration team that mirrors the buyer’s team; operations, information technology, accounting representatives from both organizations need to assess processes for a smooth transition.  Insist on this involvement, and if the buyer balks, think about why they don’t want you playing a role in the process.

Taking an active role in the merger stretches resources, but it enables you to watch out for others with a stake in your transaction: employees, customers, suppliers and shareholders.  If these groups are important to the new company’s future, understand the buyer’s plans and be able to communicate them to these stakeholders.  Watch how the buyer handles the human aspects of integration, including communication and compensation.

If the time has come for you to sell, take the time to do it right.  It’s a process that can be fraught with pitfalls.  Before you proceed, think about how to best prepare your company and find the right buyer.  Your success depends on your ability to be proactive.

Get the right advice, beginning early in the process and carrying on throughout.  Remain in control of the process, and be ready to take action when the time is right.  With an intelligent, yet measured, approach to selling, you can ensure a smooth transaction and come out on top in a volatile buyer’s market.

-       Reprinted with permission of Tatum LLC Austin

WNDE 2011-12 Tax Planning Guide Available Online

January 18, 2012 Category: Uncategorized [ No Comments ]

There have not been many changes in Washington this year in terms of politics.  Political gridlock continues and because of this there have been few changes to the tax system itself.  There has been talk of raising income tax rates, but no action as of now.  The U.S. economic outlook for growth is modest at best, depending to whom you listen.  The stock market continues its unpredictable nature – good one day, bad the next.

With this said, proactive tax planning is more important than ever.   At White Nelson Diehl Evans, we pride ourselves on our ability to work collaboratively with our clients to achieve their desired goals.  Our services are based on our firm principles of quality, integrity, and balance.

As always, our commitment to our clients, friends, and business partners is steadfast.  We will commit our resources to providing you with effective tax planning and solutions in an expeditious manner.  We encourage you to look through our planning guide and make notes on deductions, credits and other tax-saving strategies you believe could benefit you or your enterprise.

An electronic version of this Tax Guide can be found at the following link:

http://www.webtaxguide.net/WhiteNelson