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C o n t e n t s
Visit NewAccountantUSA.com for our new enhanced version of this issue.
Since 1985
FEATURES
GLOBAL OUTLOOK
4 An Introduction to IFRS for SMEs By Jacob Kamm, Assistant Professor of Accounting, Division of
Business Administration, Baldwin Wallace University and Jayne Fuglister,
Professor Emerita, Department of Accounting, Cleveland State University
CAREER OUTLOOK
6 Beware of The Self-Employment TaxThis SummerBy Steven Colburn, Associate Professor of Accounting, Maine Business
School, University of Maine and Michael Rankin, Accounting Major,
Maine Business School, University of Maine
COVER STORY PEER REVIEWED
9 How Fast Can $100,000 Disappear?By Russell Calk, Ph.D., CPA, Associate Professor of Accounting, New
Mexico State University, Mary Jo Billiot, DBA, CPA , Associate Professor
of Accounting, New Mexico State University, Pamela S. Carr, Ph.D., CPA,
Associate Professor of Accounting, Arkansas Tech University, and
Cindy Seipel, Ph.D., CPA CFE, Professor of Accounting, New Mexico
State University.
STUDENT OUTLOOK PEER REVIEWED
14 Facing Debt Collection Of A Student LoanBy By Theresa J. Holt, JD, Associate Professor, Department of
Accounting, Cleveland State University
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7/28/2019 New Accountant 754 Print Edition
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4 NEWACCOUNTANT
Editor & Publisher
Steven N. Polydoris
Associate Publisher
Marie Centenail
Graphic DesignMichael Skuras
Contributing Editor
Cathy Demetropoulos
Contact Us
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This paper provides an overview o
International Financial Reporting
Standards or Small and Medium-
sized Entities (IFRS or SMEs) and
discusses the advantages and disadvantag-
es o using IFRS or SMEs. Students are
encouraged to learn more about IFRS or
SMEs. The results o a questionnaire survey
conducted by the American Bankers Asso-
ciation in 2011 are used to determine why
IFRS or SMEs is not more broadly used in
the United States.
On May 23, 2012, the Financial Ac-
counting Foundation (FAF) Board o
Trustees established yet another new body
to improve the process o setting account-
ing standards or private companies. Thisissue has been around or thirty years.
Based on history, it seems unlikely that an
entirely separate set o GAAP or private
enterprise will be issued in the near uture,
despite the signicant cost savings benet
that could be recognized.
In contrast, the International Account-
ing Standards Board (IASB) issued the
International Financial Reporting Stan-
dards or Small and Medium-sized Enti-
ties (IFRS or SMEs, hereinater reerred toas the Standard) in 2009. The Standard
is sel-contained and has 35 topic sections.
The whole standard is only 230 pages and
is much less complex than ull IFRS and
U.S. GAAP. IFRS or SMEs is globally rec-
ognized. Over 80 jurisdictions, including
the United States, have adopted or plan to
adopt IFRS or SMEs. With over 27 mil-
lion private companies in the United States
eligible to use IFRS or SMEs (Interna-
tional Accounting Standards Board, 2012),
it is puzzling why the standard is so slow to
be widely adopted. This paper attempts to
nd answers as to why this is the case. The
paper is also designed to help each student
understand the importance o becoming
more amiliar with IFRS or SMEs.
Overview of IFRS for SMEs
The Standard is a simplication o
International Financial Reporting Stan-dards (Full IFRS). The Standard, only 230
pages long, ocuses on the needs o those
primarily concerned with cash fows, bal-
ance sheet strength, and liquidity o small
and medium-sized non-public companies.
Only topics relevant to SMEs are included
in the Standard. A list o the 35 topics and
the number o pages or each topic is on
pages 4-5 o the Standard and can be ac-
Continued on Page 18
Global Outlook
An Introduction
to IFRS for SMEsBy Jacob Kamm, Assistant Professor of Accounting, Division of BusinessAdministration, Baldwin Wallace University and Jayne Fuglister, ProfessorEmerita, Department of Accounting, Cleveland State University
7/28/2019 New Accountant 754 Print Edition
5/20
www.newaccountantUSA.com 5
Student Outlook
NewAccountantUSA.com 5
New Accountants 11 Rules For Living...Here is a list of 11 things that many high school and college graduates did not learn in school.
Beore you were born, yourparents werent as boring as
they are now. They got that wayrom paying your bills, cleaning
your clothes, and listening to youtalk about how cool you are. Sobeore you save the rainorest
rom the parasites o your parentsgeneration, try delousing the
closet in your own room.
Flipping burgers is notbeneath your dignity. Your
grandparents had a dierentword or burger fipping;they called it opportunity.
Life is not fair;get used to it.
I you mess up, its notyour parents ault, sodont whine about your
mistakes, learn rom them.
Your school may have done away withwinners and losers, but lie has not.In some schools they have abolished
ailing grades; theyll give you as manytimes as you want to get the right
answer. This doesnt bear the slightestresemblance to ANYTHING in real lie.
I you think yourteacher is tough, wait
until you get a boss. Hedoesnt have tenure. Be nice to nerds.
Chances are youll endup working or one.
Lie is not divided into semesters. Youdont get summers o and very ew
employers are interested in helping youfnd yoursel. Do that on your own time.
Television is NOT real lie. In real
lie, people actually have to leavethe coee shop and go to jobs.
Rule #1
The world wont careabout your sel-esteem.
The world will expect youto accomplish something
BEFORE you eel goodabout yoursel.
Rule #2
You will NOT make 40thousand dollars a yearright out o high school.
You wont be a vicepresident with a cellphone, until you earn
both.
Rule #3
Rule #4
Rule #5
Rule #6
Rule #7
Rule #8
Rule #9
Rule #10
Rule #11
Excerpted from Dumbing Down Our Kids: Why American Children Feel Good
About Themselves But Cant Read, Write or Addby Charles J. Sykes.
7/28/2019 New Accountant 754 Print Edition
6/20
6 NEWACCOUNTANT
Career Outlook
Many college studentswork
during the summer months
to help pay or their college
expenses. Some o these stu-
dents could be in or a big shock whenthey go to fle their income tax returns
the ollowing spring. They may discover
that, instead o getting the big income tax
reund they were expecting, they have to
pay hundreds (or even thousands) o dollars
in additional sel-employment (i.e., FICA)
taxes to Uncle Sam because their summer
employers treated them, or tax purposes, as
independent contractors (i.e., as being sel-
employed), rather than as employees. Some
employers purposely misclassiy temporaryemployees as independent contractors so
they (the employer) wont have to pay their
share o the employees FICA tax.
This article reviews the basic provisions
o: 1) the FICA and sel-employment tax
laws, and 2) provides guidance to help stu-
dents and others avoid being misclassifed by
their employers as independent contractors
and having to pay the sel-employment tax
when they le their tax returns.
Federal Insurance Contributions Act
(FICA) Taxes Levied on Employees
and Employers
In addition to income taxes, employees
must pay employment taxes, known as
FICA taxes, on their wages. This tax is
constitutional and mandatory, not volun-
tary. In general, the sel-employment tax
applies to all individuals. However, the
sel-employment tax does not apply to
nonresident aliens, unless an international
social security agreement is in place thatprovides coverage under the U.S. Social
Security system.
The two components o this tax are the
Social Security tax (statutory rate o 6.2%
o wages, limited to wages o $110,100 or
2012) and the Medicare tax (1.45% o wages
with no limit). The Social Security tax
helps the retired and disabled by providing
a regular source o income based on their
pre-retirement earnings, similar to a pen-
sion. The Medicare tax is intended to help
qualiying individuals, mostly retirees, withmedical payments.
Employers must withhold the tax rom
employees wages and periodically remit this
amount with an equal amount paid by the
employer to the government. The 2010 Tax
Relie Act reduced the sel-employment
tax by 2% or sel-employment income
earned in 2011. The Temporary Payroll Tax
Cut Continuation Act o 2011 extended
this 2% reduction through 2012, so the
Beware of The Self-EmploymentTax This Summer
Many college students work during the summer months to help pay for their college expenses. Someof these students could be in for a big shock when they go to file their income tax returns the follow-
ing spring. By Steven Colburn, Associate Professor of Accounting, Maine Business School, University of
Maine and Michael Rankin, Accounting Major, Maine Business School, University of Maine
7/28/2019 New Accountant 754 Print Edition
7/20
NewAccountantUSA.com 7
rates or 2011 remain in eect or 2012. For 2012, the employees
social security tax rate has been temporarily reduced, to 4.2% (to
help working people during these dicult economic times), but
the employers matching percent is still 6.2 percent. So, or 2012
employees pay a maximum FICA rate o 5.65 percent times their
wages and employers pay a maximum FICA rate o 7.65 percent
or a combined rate o 13.3 percent.
Example 1: Employee FICA Taxes Payable
Jane, a ull-time student, got a summer job at Beach-Body Gym
(BBG) to help pay or her college tuition. She earned $10,000 in
wages working as an aerobics instructor and during the summer
commuting rom home to work and back.
How much FICA tax should BBG withhold rom Janes paychecks?
Answer: $565, computed as ollows:
Description Amount Calculation
Janeswages $10,000 SocialSecuritytax 420 $10,000x.042
Medicaretax 145 $10,000x.0145
JanesFICAtaxeswithheld $565 $420+145
Example 2: Employer FICA Taxes Payable
Using the inormation or Jane provided above, what is the
amount o BBGs FICA match based on Janes earnings?
Answer: $765, computed as ollows:
Description Amount Calculation
JanesWages $10,000
SocialSecuritytax $620 $10,000x.062
Medicaretax $145 $10,000x.0145
BBGsFICAMatch $765 $620+145
What total amount o FICA taxes BeachBody Gym should pay to
Uncle Sam based on Janes wages?
Answer: $1,330, as ollows:
FICATaxWithheldfromJaneswages $565
FICATaxMatchedbyJanesEmployer 765
TotalFICATaxPaid $1,330
Jane and her employer combined to pay $1,330 ($565 withheld
rom Jane, and $765 matched by BBG) in FICA taxes equaling
13.3% o Janes wages ($1,330/$10,000).
Self-employment Taxes Levied on Independent Contractors
Sel-employed taxpayers (oten reerred to as independent
contractors) are required to calculate and pay the entire FICA tax
burden themselves based on their sel-employment earnings. Any
individual who has net sel-employment earnings o $400 or more
is required to pay sel-employment taxes on their income. Net
proft or loss rom sel-employment is reported on Schedule C o
Form 1040. It is then 1) transerred to Form 1040 to be taxed along
with other income, and 2) transerred to Schedule SE to calculate
the sel-employment tax. Once calculated, the sel-employment
tax is added to the Other Taxes section o Form 1040, and the
taxpayer gets a deduction or AGI or one-hal o the tax (possiblymore or 2012).
To calculate sel-employment taxes, net earnings rom sel-
employment must frst be computed. This is the gross income
derived rom any trade or business, less the deductions permitted
by the Code or that trade o business, plus any distributive share
o income or loss rom partnerships in which the taxpayer is a
general partner. Net earnings rom sel-employment is then mul-
tiplied by the net sel-employment earnings percentage, 92.35%
(which includes a built-in deduction o 7.65%). The result is then
multiplied by the sel-employment tax rate, 13.3% or tax year
2012, to get the sel-employment tax. I the sel-employmenttax is $14,204 or less, 57.51% o the amount can be deducted or
AGI or 2012. I the tax exceeds $14,204, 50% o the amount, plus
$1,067 can be deducted.
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7/28/2019 New Accountant 754 Print Edition
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8 NEWACCOUNTANT
Example 3: Self-employment Taxes Payable.
Assume that Jane (rom Example 1) was not an employee o
BBG, but was hired as an independent contractor to teach aerobics
classes. How does this change in worker status aect the amount
o FICA tax paid by 1) Jane and by 2) BBG?
Answer: Because Jane is sel-employed (and not an employee o
BBG), she must pay all o the FICA tax hersel, and BBG pays noFICA tax on Janes behal.
Janes Self-Employment (FICA) Tax Obligation
Description Amount Calculation
JanesSelf-EmploymentIncome11 $10,000
Netearningsfromself-employment
percentage
92.35%
Netearningsfromself-employment $9,235 $10,000x.9235
Self-employmenttaxrate 13.3%
JanesSelf-employmenttaxdue $1,228* $9,235x.133
*Roundedtowholedollars.
As this fgure shows, as an independent contractor, Jane would
have to pay $1,228 in sel-employment (FICA) tax. This is $663
more ($1,228-565) than she would have to pay as an employee. A
urther complication or Jane and other workers who are surprised
to nd they owe this tax at ling time is that they may not have
the money to pay the tax. Lets assume that when Jane began
preparing her income tax return she was expecting a tax reund o
about $100. Instead, she learns that she has to pay in $1,228 o SE
tax. All o a sudden, Jane has an unexpected cash fow problem.
Employee or Independent Contractor?An independent contractor is someone who has the right to
control what work will be done and how it will be done. Examples
include sel-employed persons such as doctors, dentists, accountants,
among others. Additionally, independent contractors can usually
control their own hours. For example, an independent contractor
hired by a ence company to install a ence has one job: put the
ence in according to the specifcations. They are called whenever the
ence company has work. They do not work a designated amount
o hours on specic days each week. They are also typically paid
on a per job basis and are not paid a salary or an hourly wage.
Under common-law rules, an employee is anyone who perormsservices or their boss under the conditions that the boss can con-
trol what will be done and how it will be done. The important
inormation here is that the boss has the right to control the details
o when and how the services are perormed. For example, an
employee o the ence company discussed above is someone who
is hired to work a specied number o hours on certain days each
week. An employee would arrive at work each day and daily tasks
would be assigned by their boss.
Should Jane be treated as an employee or as an independent
contractor? As we see in the discussion regarding the ence installer,
the answer depends upon the amount o control the gym owner
has over how Jane teaches her aerobics classes. I the gym has a
prescribed aerobics program that it has Jane implement, Jane may
be an employee. I the gym leaves it up to Jane to develop the
program and implement it as she sees t, Jane may be an inde-
pendent contractor. Figure 1 lists some o the twenty actors the
IRS considers in determining whether a worker is an employee oran independent contractor.
Figure1:EmploymentFactorsSugge stingEmployeeorIndepe ndentContractorStatu s
Employment
Factor
Indicates
Employee
Indicates
Independent
Contractor
Workermustfollowpayers
instructionsclosely.
Yes
No
Workeristrainedbypayer. Yes No
Workercansetownhours. No Yes
Workerisnotsupervised. No Yes
Workerprovidesowntools. No Yes
Payerpaysworkersbusinessortravelingexpenses.
Yes
No.
Summary
Being improperly classied by your employer as an indepen-
dent contractor instead o as an employee can be an unpleasant
and expensive surprise when it comes time to le your tax return.
Many students nd employment to help save money or the next
school year, but arent aware o how their compensation is treated
by the employer. It is important to make sure that FICA taxes
are being deducted rom your paycheck and are being matched
by your employer. I you are not asked to fll out a Form W-4
(Employees Withholding Allowance Certifcate) beore beginning
employment, then your new employer is likely planning to treat
you as an independent contractor rather than as an employee.
When fnding a job, it is imperative that one is aware o how their
employer is classiying them. I you work or a company on a daily
basis and are being assigned tasks consistent with those o a typical
employee, make sure you are classifed as such. As evidenced above, an
independent contrac-
tor is subject to high-
er total taxes when
their FICA taxes arenot being matched
by their employer.
Dont fnd yoursel
with a large tax bill
because you assume
your employer classi-
fed you correctly. Be
assertive, and make
sure you are being
treated airly. NA
Steven ColburnAssociate Professor of Accounting,
Maine Business School,
University of Maine
Michael Rankin
Accounting Major,
Maine Business School,
University of Maine
Article By
Career Outlook
7/28/2019 New Accountant 754 Print Edition
9/20
NewAccountantUSA.com 9
Cover Story Peer Reviewed
How Fast Can $100,000
Disappear?By Russell Calk, Ph.D., CPA, Associate Professor of Accounting, New Mexico State University, MaryJo Billiot, DBA, CPA , Associate Professor of Accounting, New Mexico State University, Pamela S. Carr,Ph.D., CPA, Associate Professor of Accounting, Arkansas Tech University, and Cindy Seipel, Ph.D., CPA
CFE, Professor of Accounting, New Mexico State University.
New graduates of accounting
programs are excited to enter the
workorce, both or the chance touse the skills rom their degree
and or the promise o opportunities result-
ing rom a healthy paycheck.
They anticipate the opportunity to save
or a house, take an exotic vacation, and
begin to lay the groundwork or their u-
ture. While making such plans they can
neglect to budget, and the costs o everyday
lie as a busy proessional oten add up leav-
ing them still living rom paycheck to pay-
check as they did in college. The ensuing
scenario ollows John and Amanda as they
graduate rom college and begin their pro-
essional lives. Although we altered certain
o the specic details to protect John and
Amandas identities, the ollowing closely
tracks the true story o two ormer students
who shared their experiences with us.
Preparing for a Career:
The College Years
From the beginning, John and Amanda
had worked hard to maintain good grades,but they also made time to go out with
riends, provide volunteer services or com-
munity and proessional organizations, and
make trips home to visit amily. They both
worked part-time and supplemented their
income with scholarships and help rom
their parents. Nevertheless, both had ound
it necessary to add supplemental support
or school and living expenses with student
loans. They generally lived rom paycheck
to paycheck. Occasional expenses were
handled by using credit cards. They both
believed that the credit card and student
loan debt that they incurred during college
would be easily paid o once they accepted
ull-time proessional positions ater gradu-
ation. John and Amanda each chose to pur-
sue a masters degree to meet the 150-hour
requirement and to be better prepared or
the CPA Exam.
The couple graduated with some stu-
dent loan and credit card debt. John
and Amanda incurred Federal Sta-
ord student loans o $11,000 and
The Need for Personal Financial Planning
for New Accounting Graduates
Continued on Page 12
7/28/2019 New Accountant 754 Print Edition
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7/28/2019 New Accountant 754 Print Edition
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7/28/2019 New Accountant 754 Print Edition
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12 NEWACCOUNTANT
$12,000, respectively. Payment o their student
loans was deerred until six months ater gradua-
tion. The ederal government paid the interest on
the loans while the couple was in college and dur-
ing the six-month grace period. Ater that, they
became responsible or repaying the principal andinterest over a maximum o ten years. Interest on
the Staord loans was 6.8%. Additionally, John
and Amanda both had VISA cards and department
store credit cards. Much o the credit card debt
was taken out during the latter part o their stud-
ies and prior to employment. First there was the
need or appropriate interview attire. Then later,
despite accepting job oers while in college, John
and Amanda had a month lag between graduation
and the beginning o their jobs. By the time they
started work, Johns credit card debt totaled $3,800,while Amanda had credit card debt o $2,200.
In the last semester o the masters program,
John and Amanda got engaged. As college stu-
dents, they were happy to take advantage o Johns
grandmothers oer o her engagement and wed-
ding rings and Amandas parents oer to take care
o the major wedding expenses.
Life after College: Living in the
Real World
John and Amanda were excited about their new
proessional lives. Both passed the CPA Exam with-
in one year o graduation. For the past two years
Amanda had been working in the tax department
in the Dallas, Texas ofce o a large international
public accounting frm. John worked in the audit
practice o a regional frm located in Plano, Texas.
Their salaries seemed like a ortune compared to
their meager student existence. Each had started
out at $50,000 gross, but now John earned $52,000,
and Amanda had just received a $3,000 increase.
As a result o their respective raises, they had $8,750
gross pay per month on which to base their budget.Johns rm paid 100% o his medical and den-
tal insurance. Amandas rm paid 100% o her
medical insurance cost, but she was required to pay
$70 per month or dental insurance. They both
contributed 3% o gross income to their rms re-
spective 401Ks. Amanda gured they both should
claim married-with-one or withholding or ed-
eral income taxes, but last year they had to drain
their savings to pay the remainder o their tax at
ling time. This year they added another $120 per
12 NEWACCOUNTANT
Cover Story Peer Review
Gross monthly income1
John $4,333.00
Amanda 4,417.00 $8,750.00
Withholding
Social Security & Medicare2
John $331.00
Amanda 338.00 (669.00)
Fed Income Tax3
John (Married, 1 + $60) $494.00
Amanda (Married, 1 + $60) 507.00 (1,001.00)
401K (3%)
John $130.00
Amanda 133.00 (263.00)
Amandas Insurance (70.00)
Net Pay $6,747.00
Monthly expenses:
Rent4 $1,200.00
Amandas parking 140.00
Cleaning 180.00
Student loan payments5 260.00
Car payments 800.00
Car insurance 150.00
Gasoline 350.00
Furniture payment 400.00
Gym membership 100.00Credit cards 400.00
Dry cleaning 120.00
Meals at restaurants 940.00
Clothing 200.00
Electricity 150.00
Water & sewer 50.00
TV & Internet 100.00
Cell phones 150.00
Groceries 440.00
Cat food & vet visits 20.00
Movies, cocktails etc. 185.00
Misc. necessities 200.00 (6,595.00)
Net Cash $202.00
1 Based on starting salaries o $50,000 each with raises o $2,000 and $3,000 ater frst year.
2 Social Security and Medicare withholding rate o 7.65%
3 2011 withholding rates
4 Advertised rent or apartment located in Plano, Texas
5 Student loans based on 2008-2009 average student debt as reported by CollegeBoards 2009 Trends
in Student Aid; 6.28% interest rate
John and Amandas Budget
Continued from Page 9
7/28/2019 New Accountant 754 Print Edition
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NewAccountantUSA.com 13
month to their combined withholding.
Amanda worked downtown and had
to pay or parking. She ound a conve-
nient parking garage next to her ofce
building or $140 a month. She could
have opted or a cheaper lot arther away,
but why walk as she had done in college?Besides, she was oten at the ofce late at
night and on weekends and elt saety was
an overriding issue.
New clothes and shoes or both were
a necessity to start their careers. Thank-
ully their credit cards had sizable limits.
Graduation money had helped some, but
the monthly minimum payments on their
credit cards had increased to $200. Most
o their work clothes had to be dry-cleaned,
and their monthly bill averaged $120.Because o their demanding schedules,
eating out was a welcome end to many o
their busy days. They ate out our or more
nights per week, oten joining up with their
newly employed proessional riends in the
area or just reconnecting with one another
ater a stressul day. Their dinner expenses
averaged $500 a month, approximately $10-
$15 each per meal. John was usually away
rom the ofce on an audit engagement at
lunch and went out to eat with the members
o his audit team. Amanda also usually went
out to lunch with coworkers. Eating out at
lunch added $440 o monthly expense.
The couple had enjoyed shopping or
their two-bedroom townhouse in the Pla-
no area. It had a two-car garage, was light
and spacious and allowed or Smokey, the
Persian cat that John had given Amanda
as a birthday present. While the rent was
$1,200, they enjoyed the beautiul and
peaceul atmosphere. Housework was a
chore or which neither one had the timeor desire. Ultimately they hired someone
to clean or $90 every two weeks so they
could have their weekends ree.
Their urniture was all new and looked
great in the townhouse. Amanda had loved
decorating and made everything look
homey and inviting. In addition to the ur-
niture, the townhouse came without all o
the appliances. They ound it necessary to
buy a rerigerator and a washer/dryer com-
bination. Both the urniture and appliance
stores oered great nancing. Their month-
ly payments were only $400 a month or
the two combined.
Car shopping was un too. They had
tried to be thrity and considered both style
and gas mileage or their new cars. John hadchosen a Nissan Altima with leather seats
and a moon roo and Amanda a standard
Toyota Camry. They had been able to make
only small down payments on each given
that their college cars were practically worth-
less. By fnancing the cars or fve years, their
combined monthly payment came to $875.
Full coverage insurance on both cars added
another $150 to their monthly auto expenses.
John and Amanda seemed to always spend
more than expected on gasoline. They wereable to average about 25 miles per gallon,
but gas prices were $3.50 per gallon in Dal-
las. They had driven 30,000 miles last year
driving to work every day, running errands
and visiting their parents in Lubbock and
Austin several times.
Amanda had always been very health
conscious and exercised at least our times
a week. She was able to convince John that
they both would be healthier and more able
to handle the stress o work i they had a
membership at the gym. The one in their
neighborhood was a little pricy, but $100
a month or the couple had proven to be
worth it.
John and Amanda eagerly looked or-
ward to buying their rst home in a amily
riendly neighborhood where they could
eventually raise children. Disappointment
arose every time they looked at their bank
balance. The amount was just not accu-
mulating the way they expected or a cou-
ple earning the salaries they did. In orderto gure out where the money was going,
they prepared the ollowing table showing
their monthly income and the breakdown
o monthly expenses.
The result o the analysis was shocking.
Without making large cuts in their spend-
ing, it would be necessary to wait until their
cars were paid o to save any signifcant
amount. Not only that, but the advice o
their ethics proessor came to mind never
put onesel in the position o needing that
next paycheck to survive, it makes it much
more difcult to walk away rom unethical
situations. While no ethical dilemmas had
arisen to date, John and Amanda recalled
their post lecture discussion. Both had ex-
pressed amazement at the thought that aproessional making a good living would
put themselves in that fnancial position.
And yet, that was now their reality.
With these sobering thoughts in mind,
they sat down with a calculator and began
to crunch some numbers. The rst step was
to break out their expenses between those
set by contract and those which could be
changed quickly. Any short term reductions
had to start with non-contractual expens-
es. Amanda turned to John, Would yourather cook or clean the house? she asked
only somewhat jokingly. Neither laughed.
What i something happened at either o
their jobs? Could they even cover their
minimum contractual obligations? The
realization was rightening. They could
both eel an intense pressure to make some
changes quickly. NA
Russell Calk, Ph.D., CPA
Associate Professor of Accounting,
New Mexico State University
Mary Jo Billiot, DBA, CPA
Associate Professor of Accounting,
New Mexico State University
Pamela S. Carr, Ph.D., CPAAssociate Professor of Accounting,
Arkansas Tech University
Cindy Seipel, Ph.D.,
CPA CFE
Professor of Accounting, New
Mexico State University
Article By
7/28/2019 New Accountant 754 Print Edition
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14 NEWACCOUNTANT
Student Outlook Peer Reviewed
7/28/2019 New Accountant 754 Print Edition
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NewAccountantUSA.com 15
Astonishingly, outstanding stu-
dent loan debt now exceeds$1 trillion, according to the
Consumer Financial Protec-
tion Bureau. This amount is
more than either credit card or auto loan
debt and is approximately 6.6 percent of
the Gross Domestic Product (GDP). By the
end of college, the average debt for an indi-
vidual student is greater than $25,000 with
some students owing $100,000 or more. The
Department of Education reports that the
default rate for federal student loans roseto 9.1 percent in 2012, up from 8.8 percent
in 2011. The tremendous debt load carried
by students is likely to impede their ability
to pursue various life events (e.g. buying a
house, investing for the future, etc). Add-
ing a sluggish economy to the mix, students
may find themselves unable to repay these
large sums of money and the debt goes into
default. The problem is real.
Facing Debt CollectionOf A Student LoanBy Theresa J. Holt, JD, Associate Professor, Department of Accounting, Cleveland State University
When the debt
collector calls,
dont panic. Be
inormed. A consumer debt,
which includes a student loan,
is an obligation o an indi-
vidual to pay money arising
out o a transaction involving
money, property, insurance or
services primarily or personal,
amily or household purposes.
Does it matter that a student
loan is a consumer debt? Yes,
it does and in a good way. As a
inancial obligation incurred to
obtain educational services or
a personal purpose, a student
loan alls under the coverage o
an important law designed to
provide a degree o protection
or those persons acing the
debt collection process. This
law is called the Fair Debt Col-
lection Practices Act (FDCPA).
To be clear, the FDCPA does
not excuse a student or any
consumer rom the responsi-
bility o paying a valid debt.
However, one o its purposes
is to prevent abusive collection
practices.
When the debt collector calls, then what?
7/28/2019 New Accountant 754 Print Edition
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16 NEWACCOUNTANT
T
he FDCPA applies to consumer debt but not to com-
mercial debt. Other laws govern business transac-
tions. Also, the FDCPA applies to third party debtcollectors. Creditors and in-house collectors are not bound
(with limited exception) by the restrictions o the FDCPA.
For clarity, a creditor is any person who oers or extends
credit, thereby creating a debt,
or any person to whom a debt
is owed. By contrast, a debt
collector is any person who is
in a business or the principal
purpose o collecting debts
or who regularly collects or
attempts to collect debts owed
to another person.
A
debt collector may be mistaken about someones
identity or may not be aware that the debt has been
paid. In either case, asking or validation serves theuseul purpose o eliminating the problems associated with
these scenarios.
The collector is required to provide written notice to
the debtor o the debtors right to di spute the debt.
Within thirt y days o receiving the notice, the debtor
has the right to dispute the debt in writing. Be aware that
disputing a debt with a collector does not stop the collector
rom going orward with a lawsuit.
Prevalence ofAbusive Tactics
Properly Handle Communications
Note the Differences Ask for Validation of the Debt
Right to Dispute
Occurrences o some
debt collectors (not
all) using harassment,
repeated phone calls to the debt-ors workplace or home, alse
threats, and abusive language
have been reported. Over 180,000
debt collection complaints were
received in 2011 by the Federal
Trade Commission (FTC), the
agency charged with working on
behal o consumers to prevent
raudulent, deceptive and unair
business practices. (At the time
o this writing, the FTC report
or 2012 has not been released.)
In addition, numerous lawsuits
are iled each year against debt
collectors. It is very important or
students to know their rights in
order to protect themselves rom
abusive tactics that contribute to
job lo ss, mari tal disharmony, and
lack o privacy.
In general. A debt collector is not permitted to communicate
with a debtor at an unusual or inconvenient time or place,
unless the debtor consents or a court orders. A conve-
nient time is considered to be ater 8a.m. and beore 9p.m.
local time or the debtor. I the debt collector knows that an
attorney represents the debtor, the collector should not com-
municate directly with the debtor unless the attorney ails to
respond or grants consent. Further, a collector is prohibited
rom communicating at the debtors place o employment i
it is orbidden.
Third parties. With regard to inorming third parties about the
debt and the collection process, the collector is allowed to communicate with the debtors
spouse, parents (i debtor is a minor), guardian, executor, administrator, creditor, attorneys
or the debtor, creditor and debt collector, and a consumer reporting agency.
The collector is permitted to contact (usually once) additional third parties or the pur-
pose o acquiring location inormation (i.e. the debtors residence, phone number and place
o employment). It should not be revealed that the individual owes a debt. The collector
is prohibited rom communicating by post card with either third parties or the debtor androm using envelopes with symbols or language (address okay) indicating the debt collection
business. Limiting communication with third parties preserves the privacy o the debtor.
Cessation. The ability to stop communication with a debt collector is a powerul tool in the
debtors arsenal. It does not discharge the debt, but it can provide a quiet peaceulness, at least
or awhile. It orces the collector to go orward, perhaps with legal action, or to discontinue
the pursuit. In any event, it is a type o put up or shut up strategy. To exercise the right
to cease communication, the debtor must notiy the collector in writing. At which time, the
collector is allowed to inorm the debtor that collection eorts are being terminated, that
speciied remedies may be invoked, or that the collector intends to invoke a speciic remedy.
Student Outlook Peer Reviewed
7/28/2019 New Accountant 754 Print Edition
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NewAccountantUSA.com 17
I
t is a violation o the law or a debt collector to en-
gage in harassing , oppressive, or abusive behavior. A
collector is prohibited rom using or threatening touse violence. Obscene or proane langua ge is orbidden.
The collector is not allowed to publish a list o people,
who have reu sed to pay their debts, e xcept to a cons umer
reporting agenc y. A debt should not be advertised or sale
in an eort to coerce payment. Either telephoning or
engaging someone in telephone conversation repeatedly or
continuously with the intent to annoy, abuse or harass that
person is prohibited conduct. Failure to make a meaningul
disclosure o the callers identity constitutes a violation.
Adebt collector is prohibited rom using any alse,deceptive, or misleading representation or methods
to collect a debt. It is illegal or a collector to
alsely represent the character, amount or legal status o a
debt or to misrepresent ser vices rendered or c ompensation
received by the collector. Furthermore, the collector is not
permitted to represent or imply that nonpayment o a debt
wi ll resu lt in arrest or impris onment or wi ll resu lt in the
seizure, garnishment, attachment or sale o property or
wages, unless the action is law u l and intende d.
Unair and unconscionable (i.e. immoral)
practices are not permitted. The collection
o interest, ees, or other charges is a viola-
tion unless authorized by contract or law. It is illegal
or a collector to solicit a postdated check in order
to threaten or institute criminal prosecution or to
deposit or threaten to deposit prior to the date on the
check. A collector is not permitted to cause charges
(e.g. collect telephone calls and telegram ees) to be
made to a person by concealing the true purpose o
the communication. It is not allowed or a collec-
tor to take or threaten to take nonjudicial action to
dispossess or disable property i no right or intention
exists to do so or i the property is exempt. Any o
these actions would be considered unair and lacking
o good moral conscience.
Astudent loan, as a consumer debt, alls within the coverage o the FDCPA. The law does not discharge the loan but in-
stead regulates the conduct o debt collectors by limiting communication and conduct. Harassment and abusive tactics
are orbidden. Also, a collector is prohibited rom making alse and misleading representations or engaging in unair
and unconscionable practices. The FDCPA empowers a debtor. Having knowledge o the protection aorded by the law is a
good start or any student.
Be Alert for Unfair orUnconscionable Practices
Keep Records
Conclusion
Object to Harassment or Abuse Watch for False andMisleading Representations
Keep records o
any communica-
tion with a debt
collector. This inormation
will be valuable or proving
a violation. I the situation
warrants, consult with an
attorney who specializes
in this area o law.
7/28/2019 New Accountant 754 Print Edition
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18 NEWACCOUNTANT
cessed by going to http://www.irs.org/
IFRS+or+SMEs/IFRS+or+SMEs+and+r
elated+material.htm#sme_en.
In addition, the IASB website pro-
vides ree access to all the learning tools,
although you have to rst register on the
iasb.org website. Since the Standard will
be revised only once every three years, the
content will not be subject to constant
changes. This will make the Standard
easier and less costly to implement. It is
likely that the next revision to the Stan-
dard wont be issued until 2014.
While the principles under the Stan-
dard are simplied, Full IFRS, and U.S.
GAAP, are based on similar accountingconcepts and principles. Overall, the
Standard is clearer and contains 90% less
nancial disclosures. (International Ac-
counting Standards Board, 2012).
When the Standard is compared di-
rectly to U.S. GAAP, the signicant ac-
counting dierences include:
Disclosures are simplied in a
number o areas including pensions,
leases, and nancial institutions
LIFO is prohibited
Goodwill and indenite lie intangible
assets are amortized over a period not
exceeding ten years
Depreciation is based on a
components approach
A simplied temporary dierences
approach to income tax accounting
Reversal o impairment charges, i
certain criteria are met, is allowed Accounting or nancial assets and
liabilities makes greater use o cost
Advantages/Disadvantages IFRS for
SMEs vs. GAAP
In addition to the lower reporting costs,
reduced complexity, and convenience as-
sociated with the Standards brevity and
simplifed organization by topic, a private
company in the United States may elect to
use the Standard because:
The private company is owned by a
oreign parent
The private company has a oreign
investor
The private company is a supplier to
oreign companies
The private company has a oreign
venture partner
There are two signifcant disadvantagesto using the Standard in the United States.
First, the Standard is not well known or ex-
tensively adopted and, as a result, U.S. lend-
ers preer U.S. GAAP. Secondly, as with
any signifcant accounting change, there
may be signifcant inormation technology
and training costs related to adoption.
ABA Questionnaire Survey Findings
An American Bankers Association sur-
vey ( ABA , 2011) reported responses rom
47 fnancial institutions related to the use
o the Standard by private U.S. enterprise.
Only 5% o respondents believed that the
U.S. should adopt the Standard. Interesting-
ly, 43% frmly believed that there should be
some type o private company accounting
standards. The ABA survey indicated that
simplifcation o accounting standards, one
o the obvious advantages o the Standard,
was the most common response to making
the standards more useul.
Thus, a logical conclusion rom the
survey responses is that lenders do wantU.S. GAAP or private companies but they
do not want private company accounting
standards promulgated by the IASB.
Conclusion
As more U.S. private companies conduct
business outside the United States, they
will be applying or more oreign fnancing.
Since the Standard is globally recognized,
oreign lenders will readily accept fnancial
statements prepared using the Standard be-cause they are amiliar with them. As U.S.
lenders become increasingly exposed to the
Standard and stringent lending restrictions
resulting rom the fnancial crisis o 2008
are eased, they may also begin to broadly
accept the Standard.
Thereore, i you aspire to work or a
global private company, encourage your
accounting instructors to begin teaching
the corresponding IFRS or SME section
as you cover a particular subject in Inter-mediate and Advanced Accounting. Indi-
vidually, seize the initiative and reely log
on to the iasb.org web site to access the
Standard and training modules.
When more U.S. accounting and bank-
ing proessionals become amiliar with the
Standard, the Standard will be used more
due to its cost savings and its broad global
adoption. NA
An Introduction to IFRS for SMEs Continued from Page 4
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