KPMG to Pay $456 Million for Criminal Violations

Largest-Ever Tax Shelter Fraud Case

News Release from the IRS

WASHINGTON ? KPMG LLP (KPMG) has admitted to criminal wrongdoing and agreed to pay $456 million in fines, restitution and penalties as part of an agreement to defer prosecution of the firm, the Justice Department and the Internal Revenue Service announced today.

In addition to the agreement, nine individuals?including six former KPMG partners and the former deputy chairman of the firm?are being criminally prosecuted in relation to the multi-billion dollar criminal tax fraud conspiracy. As alleged in a series of charging documents unsealed today, the fraud relates to the design, marketing, and implementation of fraudulent tax shelters. Read more

Posted on August 30, 2005
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Audit Firms Tell Partners Not to Poach KPMG Clients (Update1)

Aug. 23 (Bloomberg) — The three largest U.S. accounting firms ordered their partners not to poach clients or personnel from smaller rival KPMG LLP while it is under federal scrutiny for allegedly selling abusive tax shelters, people familiar with the matter said.

The directives, from Deloitte & Touche LLP, Ernst & Young LLP and PricewaterhouseCooopers LLP, are meant as a temporary measure to help prevent KPMG’s collapse, the people said. The three firms are worried that KPMG’s demise would have wide-ranging consequences for the accounting profession, leaving thousands unemployed and possibly prompting authorities to order the breakup of the remaining firms, the people said.

Without KPMG, “life would be very awkward for the Big Three accounting firms,” said Professor Stephen Calkins, an antitrust expert at Wayne State University Law School in Detroit. “There would be more chance that government officials would decide that competition is not working here and something drastic needs to be done.”

The firms acted separately, not in collusion, to avoid capitalizing on KPMG’s troubles, the people said. Still, their behavior could spark antitrust questions about how each came to the same decision, Calkins and other lawyers said.

“Antitrust as a discipline is always very nervous when competitors work together to achieve ends not flowing from market forces,” said Calkins, a former general counsel of the Federal Trade Commission. “If a firm did this unilaterally, it would not violate” antitrust law, he said.

Negotiating With Prosecutors

KPMG, which has about 1,600 partners and reviews the books of more than 1,000 companies including General Electric Co. and Pfizer Inc., is negotiating with federal prosecutors in New York to avoid criminal charges over the sale of tax shelters, people familiar with the case have said. The firm, in an agreement that could come as early as this week, may pay as much as $500 million and accept outside oversight to avoid being indicted, the people said.

In June, KPMG issued a statement saying it was cooperating with the government probe and that it no longer provides questionable tax shelter services. Tom Fitzgerald, a spokesman for KPMG, declined to comment.

Steven Silber, a spokesman for Pricewaterhouse, and Jeffrey Zack, a spokesman for Deloitte, declined to comment. A spokesman for Ernst didn’t return phone calls requesting comment. The four largest accounting firms are all based in New York City.

Edward Nusbaum, the chief executive of Chicago-based Grant Thornton LLP, said his firm, the fifth biggest, wasn’t aware of the agreements to help KPMG. While Grant Thornton generally doesn’t compete with the Big Four for clients, Nusbaum said he is in favor of helping out.

“It is certainly in the best interest of the profession and of the capital market system to have KPMG thrive and survive,” he said.

Arthur Andersen

Pricewaterhouse, Deloitte and Ernst decided independently not to prey on KPMG largely because of their experience dealing with the collapse of Arthur Andersen LLP after it was indicted in 2002, the people familiar with the matter said.

Andersen, which had been the fifth biggest accounting firm, was accused by federal prosecutors of obstructing an investigation into audit client Enron Corp., the Houston-based energy company. The firm’s conviction, overturned by the U.S. Supreme Court in May, reduced the number of large accounting firms to four.

Andersen’s collapse led hundreds of companies to seek new auditors and put 85,000 people out of work. Deloitte, Ernst, Pricewaterhouse and KPMG had to pick up many of Andersen’s auditing clients and partners and were ill-prepared for the additional burden, the people said.

Auditor Conflicts

Strict Securities and Exchange Commission rules governing auditor conflicts, passed in the 2002 Sarbanes-Oxley corporate governance law, are a concern to Pricewaterhouse, Deloitte and Ernst, the people said. Under the rules, companies aren’t allowed to use the same accounting firm for auditing and such services as information technology consulting.

Because so many companies use at least one of the Big Four for non-audit work, the SEC rules limit the firms’ ability to pick up KPMG clients. Many businesses already face strictures on which firm they can hire as auditors because they have consulting deals with at least one of the others, said Gary Brown, a partner at the law firm of Baker, Donelson, Bearman, Caldwell & Berkowitz in Nashville, Tennessee, who represents corporate boards.

`Pretty Difficult’

“It is pretty difficult for large companies to get the accounting services they need, and one less accounting firm is going to exacerbate that,” he said.

Aside from their self-interest, the three other firms may feel some sympathy for KPMG because they have each had their own legal troubles, the people said.

Pricewaterhouse was fined an undisclosed amount of money by the Internal Revenue Service in 2002 for promoting improper tax shelters and Ernst paid $15 million to settle an IRS tax shelter investigation in 2003. In April, Deloitte paid $50 million, the largest fine ever levied by the SEC against an accounting firm, to settle civil claims in connection with the firm’s audits of Adelphia Communications Corp., now based in Greenwood Village, Colorado.

To contact the reporter on this story:
Robert Schmidt in Washington at rschmidt5@bloomberg.net.

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Posted on August 23, 2005
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What Does Your Website Say about You?

Consumers unhappy with website simply go away

More than 70% of consumers may be unlikely to purchase from, or even return to, a web site after encountering a pet peeve, according to a new survey by Hostway Inc., conducted by TNS and reported by the Center for Media Research. And, because only 25% of consumers say they’ll complain to the companies about their pet peeves, the use of features that annoy consumers may be having a negative impact that’s difficult to trace or measure.

Pet peeves, according to the survey… Read more

Posted on August 23, 2005
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Gallup: Accounting Reputation in Recovery

Gallup’s annual update on the images of various business and industry sectors in the country finds that the accounting profession image appears to be recovering.

But, Gallup says, “Even though the accounting sector fares better this year, these ratings are still lower than they were before the accounting scandals in late 2001 and 2002 at major corporations like Enron and WorldCom.”


The current score for the accounting sector is +28, up from +20 last year. In 2001, Americans rated this sector with a net +39 score, but after the accounting scandals came to light in 2002, its net score dropped to 0. Read more

Posted on August 22, 2005
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2 Firms Merge, Open New Haven, Conn., Office

NEW HAVEN, Conn. - Two CPA and business-valuation firms - Meyers & Harrison, LLC of Woodbridge and Marenna, Pia & Associates, LLC of Wallingford - have merged and will be relocated to New Haven. The new entity, known as Meyers, Harrison & Pia, LLC, will have a staff of 29. Additional offices are in Greenwich and Glastonbury. Mark Harrison serves as managing partner of the new firm. Kenneth Pia Jr. heads its business-valuation department. Randy Harrison will manage the firm’s tax department. Michele Spence heads up accounting and auditing. Donald Clark leads tax and accounting work with emerging businesses.
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Posted on August 22, 2005
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Intuit CEO tells Feds to stay out of tax-prep software biz

Intuit has long complained about governments offering tax-prep software that would compete with its popular TurboTax software.

A trade association it funds (the Computer and Communications Industry Association) calls such ideas “contrary to the principles of free enterprise and limited government that have fostered our nation’s economic development since its founding, and (we) will continue to seek to curtail such undertakings.”

(On a more pragmatic level, IRS-created taxware isn’t exactly going to be the most helpful in finding overlooked deductions and obscure tax credits.)

On Monday, Steve Bennett, Intuit’s president and chief executive, took his company’s arguments to the Progress and Freedom Foundation’s conference here in Aspen, Co.

In a luncheon speech, Bennett told the cautionary tale of the U.K. government, which decided to become the “monopoly provider of electronic tax services” and found its returns were wrong 27 percent of the time.

The U.S. government should avoid repeating that mistake, he said. “Government should not compete with its citizens.”

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Posted on August 22, 2005
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MAP PREVIEW: Begin the Tough Discussions

Tips and Previews for the upcoming Missouri MAP Conference.
Register today at “Transformation Strategies”

from Steve Epner CSP
Brown Smith Wallace Consulting Group

1) WHAT ARE THE MOST CRITICALLY IMPORTANT PRACTICE MANAGEMENT ISSUES FACING CPAs AND THE PROFESSION?
Facing the reality of ?outsourcing? and the economics associated with the answers you arrive at.

2) WHAT CAN OR SHOULD CPAs AND/OR THE PROFESSION BE DOING ABOUT THESE CRITICAL ISSUES?
Open and honest discussions between members of the profession and an educational program to the public so they understand what it all means.

3) HOW WILL YOUR PRESENTATION IN PARTICULAR ADDRESS SOME OF THESE ISSUES?
I will discuss alternative services in technology that can be profitable. I will discuss how technology can be used with outsourcing to improve the bottom line but keep service high. In my second session (Succession) I will ask if these questions are ones that are better answered by the next generation of owners and managers.

4) WHAT WILL BE THE MAIN “TAKE-ALWAYS” FROM YOUR PRESENTATION TO THE ATTENDEES?
Technology: what are ways CPAs can service their clients better and make money using or around technology.

Succession: what are the hard questions you must ask yourself as you approach the idea of a transition?

5) AFTER HEARING YOUR TALK, WHAT’S THE FIRST THINK THAT YOU’D WANT ATTENDEES TO DO WITH WHAT YOU TOLD THEM?
Technology: select the one idea that might fit them best and begin the necessary research to determine if it is the best answer for them and then to have a plan to move to implementation.

Succession: Begin conversations with partners, significant others and oneself about the tough issues that must be faced.
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Posted on August 22, 2005
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What’s Bill Gates Thinking Now?

A look at his reading stack may give us some clues.

by Rick Telberg
At Large for AICPA Insider

If a few decades ago, you knew what Bill Gates knew about the future, you wouldn’t need to be reading this.

To find out what Bill Gates knows about the future now, try reading “FAB: The Coming Revolution on Your Desktop ? From Personal Computers to Personal Fabrication.” It’s one of five books the software mogul recommended at his annual CEO Summit a little while ago.

Want a clue into the future? Take a peek into the mind of Bill Gates. You’ll find a few common themes: Tough competition, relentless change, and unflinching standards. Read more

Posted on August 20, 2005
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Estate tax battle pits the rich vs. the super-rich

Saturday, August 13, 2005

By Jeffrey H. Birnbaum and Jonathan Weisman / The Washington Post

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WASHINGTON — The very rich and the merely rich are fighting over the fate of the estate tax.

So far, the very rich are winning.

Small-business owners — the merely rich — want to exempt from taxation inheritances of up to $10 million. The very rich — people whose estates are worth tens of millions or even billions of dollars — want instead to reduce the tax rate on assets passed on at death. A $10 million exemption isn’t nearly enough for them.

To the pleasure of the very rich, the leading compromise in the Senate would drastically lower the top rate on inherited assets — to 15 percent from 47 percent. But, to the chagrin of the merely rich, the exemption wouldn’t come close to their demands.

Small businesses are irate. “We don’t think that a compromise that leaves small business at the starting gate and takes care of the rich guys is a good thing,” said Donald Danner, executive vice president of the National Federation of Independent Business, which represents small-business owners. “Our members would be very upset.”

Representatives of the very rich are much happier but are also girding for battle. “The other side is painting our people as extraordinarily rich,” said John J. Motley III, senior vice president of the Food Marketing Institute, which represents many family-owned supermarket chains. “We plan our lobbying to get more intense.”

This elite conflict has serious implications for average citizens as well: a sharp reduction in the estate tax would deprive the federal government of tens of billions of tax dollars each year. “Wealthy people will get tax cuts they don’t need at the expense of important public services like food stamps and health care,” said Matthew Gardner of the Institute on Taxation and Economic Policy, a liberal research group.

Only a small number of people would benefit directly from a change. Of the 2.4 million adults who died in 2003, just 28,600 left estates that were liable for any tax, according to the nonpartisan Tax Policy Center. In other words, the levy fell on the richest 1.2 percent of Americans with the highest taxable estates.

Still, thanks to lobbying by the heirs of Wal-Mart stores, Mars candies and Campbell soup, the tax is close to becoming extinct. For nearly two decades, clusters of extremely wealthy people have campaigned to get rid of the tax on inheritances. NFIB, a Republican stalwart, joined the effort in the mid-1990s, bringing with it numerous small-business and farm groups.

Pressure from those powerful groups helped persuade President Bush to call for a repeal during his campaign in 2000. But budgetary constraints allowed him only a partial victory the next year. Bush signed into law a bill that eliminated the tax for one year only — 2010. It will pop back to life in 2011 unless Congress acts to change it.

Hence the debate. The House voted in April to abolish the tax permanently. The Senate is scheduled to take up the matter during the week of Sept. 5.

Senators and lobbyists agree there aren’t enough votes for complete repeal because of how much it would cost (about $75 billion a year between 2014 and 2024) and because of procedural obstacles that Democratic opponents are expected to erect. That has spurred negotiations to find a less expensive compromise.

Sen. Jon Kyl, R-Ariz., who is leading the talks, has devised a basic outline for the compromise. Its heart is the 15-percent rate, which matches the rate applied to long-term capital gains — the profits from the sale of property or securities. Kyl believes that a rate that low would prevent the fire sale of assets to pay inheritance.

“At 47 percent, the (estate) tax today is a great inhibitor to growth,” Kyl said, “and is also a business-ending event.”

But the Arizonan’s focus on rates has disappointed small-business advocates who prefer a larger exemption and a smaller rate cut. “Some in the Senate are very anxious to find a compromise,” Danner said. “But when you go down that path, you quickly get to rates versus the exemption. We’d like a $10 million exemption.”

That size exemption would permit virtually all of NFIB’s 600,000 members to escape the tax.

But owners of bigger businesses wouldn’t be satisfied with a $10 million exemption. Many supermarket chains, beer wholesalers and auto dealerships are controlled by families and contend that they would still face huge taxes on assets they inherit unless they get extra relief.

“To me, the most important factor is the rate,” said Seattle Times Publisher Frank Blethen, who is part of a coalition of very rich people who oppose the tax. “I’d like the exemption as high as possible but not if it sacrifices the rate.”

Heirs to the $84 billion Wal-Mart fortune, for example, “would save billions of dollars in tax” with repeal or the Kyl compromise, said Michael Graetz, co-author of “Death by a Thousand Cuts: The Fight Over Taxing Inherited Wealth.”

The Joint Committee on Taxation, Congress’s official tax scorekeeper, estimates that an estate tax compromise similar to Kyl’s that sets the rate at 15 percent and the exemption at $3.5 million — the same as current law mandates in 2009 — would cost $53 billion in 2015, or about three-quarters of full repeal.

Clearly, however, the benefits would not be widespread. A new study by the Congressional Budget Office concluded that a $3.5 million exemption in 2000 would have forced a mere 94 family-owned businesses and 65 family farms to pay any estate tax — which works out to 0.007 percent of adult deaths that year. Only 54 such enterprises would have had to liquidate assets to pay the taxes, the study added.

The estate tax repeal movement began in the late 1980s when Patricia Soldano, an estate planner in Southern California, teamed with Blethen to lobby Congress. Soldano was bankrolled by a handful of families with vast holdings, including the Mars family of McLean, Va., who made millions from candy; Mrs. R.B. Davenport III of the Krystal hamburger fortune; and Dorrance H. “Dodo” Hamilton, a Campbell soup heiress.

Soldano joined the financial clout of her clients with the grass-roots muscle of small-business and farm groups that agreed that the fate of their family-owned enterprises were jeopardized by the tax.

But last year the very rich and the merely rich began to part ways. Persistently high budget deficits made permanent repeal look doubtful. So some of the wealthiest families turned to Aubrey A. Rothrock III, a lobbyist at Patton Boggs LLP, to promote a compromise that would permanently lower the rate and provide much-desired certainty for their estate planning.

Rothrock represented the Mars family, Wal-Mart heirs, the families that own Rich’s prepared foods and Wegmans Food Markets, and Soldano’s Policy and Taxation Group.

These very rich families had an advantage: access to politicians. Blethen has traveled to Washington frequently for meetings, including a “death tax summit” two months ago with Kyl, White House officials and potential Democratic supporters. Robert Johnson, founder of Black Entertainment Television and an estate tax opponent, said he made his case to Bush personally on a July 15 flight to North Carolina, where the two appeared together at a public event.

The wealthy also have good relations with Democrats. Wegmans owners have courted Sen. Charles Schumer, D-N.Y., and both Democratic senators from New Jersey have been visited by owners of Shoprite stores in their state.

Further complicating the search for compromise are the efforts of the Association for Advanced Life Underwriting, whose members include estate planners who stand to lose a large piece of their livelihoods if the tax no longer looms at the end of life. The AALU hired two Democratic lobbyists, Jeff and Steve Richetti, who started an anti-repeal group called the Coalition for America’s Priorities.

The coalition has run newspaper and television advertisements in the states of senators whose vote on the inheritance tax is up for grabs. One newspaper ad pictures a woman in an elegant gown and reads, “The last thing a rich heiress needs is a one trillion dollar raise in her allowance.” The effort also is supported by nonprofit organizations, which fear that an end to the tax will dry up endowments that are often funded by inheritances.

“There’s not only a social value that’s at stake, there’s a self-interest involved,” conceded Gary Bass, chair of Americans for a Fair Estate Tax, which is backed by liberal groups and nonprofits.

The dispute could lead to stalemate, a result that some fans of repeal wouldn’t mind. “There is absolutely nothing to be gained by settling the issue with compromise this year,” said Dirk Van Dongen, president of the National Association of Wholesaler-Distributors. “One very viable option is to wait and try to elect more pro-repeal senators next November.”

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Posted on August 20, 2005
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Small firms can make workers feel special

By Kristin Backhaus

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Question: What steps can I take to make my small business employee-friendly?

Answer: Many organizations vie for the “best place to work” title, and for many large companies, becoming an employer of choice allows them to attain a competitive edge within their industry.

Small businesses can also profit from being employee friendly. Large companies tend to highlight their big-ticket perks to earn their titles, but being a good employer is really about consideration for the employee. Here are some things a small business can do to earn their own reputation as a local “employer of choice.”

Listen to your employees: Your employees have a lot to say. First, they can tell you what they need in order to do their jobs well. Ask them if they have the tools, the space, and the working conditions that will enable them to work at their best. Be open to suggestions about product or process changes.

Their ideas may help you to improve your business, and your willingness to listen makes them feel like they matter. Second, be aware of your employees’ needs. People are motivated in different ways. For some employees, the promise of a wage increase may spark excellent performance. For others, an additional day off, or the possibility of a promotion in title may motivate. You’ll never know unless you ask.

Be fair and consistent: While everyone is different, employees need to see you as a fair and consistent boss. If they believe that the “favorite” employee gets different treatment, their commitment to their job will likely be affected in a negative way. Maintain a uniform set of policies, and enforce them evenly across the entire staff.

Have fun: Fun, laughter and a relaxed atmosphere go a long way toward making a business employee-friendly. Even the most serious enterprise can benefit from a joke or a laugh from time to time. Schedule time for breaks or lunches together, provide dessert or snacks or some other treat that makes your employees feel that they are special and valued.

Kristin Backhaus is an assistant professor of management at the State University of New York at New Paltz. She teaches and conducts research in the areas of human resource management and leadership.
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Posted on August 20, 2005
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The Little Guys Doing Large Audits

AUGUST 22, 2005

NEWS: ANALYSIS & COMMENTARY

Cheaper, more attentive second-tier firms are scoring clients off the Big Four

When the board of directors of Hercules Inc. (HPC ), a $2 billion Wilmington (Del.) chemicals company, decided earlier this year to reconsider who should audit their books, they took bids from three of the Big Four accounting firms. The incumbent auditor, PricewaterhouseCoopers (PWC), was among those competing. That the big firms would be in the running for Hercules’ account is not a surprise. It has operations scattered throughout the U.S., Europe, and Asia.

But when the bidding ended, the winner was a name you might not expect: BDO Seidman. One of the “Tier Two” accounting firms, BDO booked just $365 million in U.S. revenue in 2004, vs. PWC’s $6 billion. And with 25,000 employees around the world, compared with PWC’s 112,000-person network, it can’t match its rival’s manpower. Still, BDO convinced Hercules’ board that it could make decisions faster and that its chemical industry experience would help it do a good job at a good price. “There was a sense that we would be important to BDO, that there will be top management attention if we have problems,” says John K. Wulff, Hercules’ nonexecutive chairman.

For years, the big international accounting firms — PWC, Ernst & Young, Deloitte & Touche, and KPMG — had a lock on companies with $1 billion in sales or more. But more and more of these companies are now eyeing the four second-tier firms, especially Grant Thornton, the fifth largest with more than $700 million in revenue last year, and BDO at No. 6. Reasons vary. Many companies, like Hercules, initiate a shift in a search for better service, a lower bill, or both.

In other cases, though, big accounting firms are resigning because they need their manpower to focus on their largest, most profitable clients. The requirements of the Sarbanes-Oxley Act have increased the number of hours required for a typical audit by more than 30%, and there is a shortage of qualified auditors to take up the slack. The Big Four, says Jonathan Hamilton, editor of the Public Accounting Report, “had to shed clients that in a perfect world they would like to keep.”

The result: According to proxy advisory firm Glass, Lewis & Co., 238 companies with revenues of $100 million-plus switched auditors in 2004, up from 115 in 2003. The winners have been the second-tier firms. But within that group, none has outdone BDO. According to Glass Lewis, BDO gained 71 new clients in 2004, after factoring in gains and defections. Grant Thornton, McGladrey & Pullen (No. 7), and Crowe Group (No. 8) gained 46 such clients combined.

All of the Big Four, meanwhile, posted significant net losses in their client rosters. Not every company, of course, is a good candidate for a second-tier auditor. Companies with worldwide operations still need the Big Four’s unparalleled geographical coverage. “That’s why General Motors is not in the picture for us,” says BDO Chief Executive Jack Weisbaum.

Among the second-tier, what sets BDO apart? For one thing, the firm has deep expertise in areas such as shipping, retail, and apparel. That has helped it do a better job of holding onto existing clients than other second-tier firms. BDO gained 109 new clients and lost 38 last year, while Grant Thornton gained 80 and lost 63.

QUALITY GROWTH
Both BDO and Grant Thornton are growing well. On Aug. 15, BDO will report $440 million in U.S. revenue for its fiscal year ended June 30, a 21% increase over last year’s $365 million. Grant Thornton’s revenue climbed more than 30% last year and is likely to be up close to 30% again in 2005. Edward E. Nusbaum, Grant’s CEO, says the firm has won 50 new public company clients so far this year.

Historically, one of the top reasons the BDOs of the world could never capture the large-cap market was the objections of analysts and investment bankers who argued that a Big Four auditor was important to investor confidence. So when Hercules made its move, Chairman Wulff says that managers worried they might hear boos from Wall Street. But that hasn’t happened. One cheerleader is Deutsche Bank (DB ) analyst David Begleiter, who raves that “it’s positive, actually. It’s saving a lot of money.”

By Nanette Byrnes in New York
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Posted on August 20, 2005
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Small Business Savvy: Reaching Key Big Business Decision Makers

By Janis Pettit
As a solo entrepreneur or small business owner, one of our key challenges can be reaching key decision makers in larger companies. Getting to the right person who can seal the deal can be a frustrating experience, especially if you don?t have a game plan. Here are three ways to connect with the right people.

Cold Calling

In this age of voice mail, reaching prospects by phone has become more difficult. Cold calling will most likely reap stronger results if you?re trying to reach small business owners, where connecting with the owner by phone is more likely, but with persistence you can reach corporate managers as well. There are several important steps you need to take to get results from cold calling?

Make sure you write a phone script that, in 30 seconds, will convey what you do and what benefit similar customers have gained from your service. This is essential. You?re phone script must answer the prospect?s question, ?what?s in it for me??

Practice your phone script until it feels natural and fits your communication style.

Make sure it conveys your excitement about your offering.

When you get the right person on the phone, tell them you have some exciting information for them and would they be able to give you 30 seconds to share it.

End your script with an intriguing piece of information, specific product results that are impressive, or a question that will make them want to know more.

Be persistent. Keep calling at different times of the day until you get the prospect on the phone. Leaving a message is rarely successful, but if you can?t ever catch the person on the phone, you can always give it a try.

When you get a prospect on the phone, ask their permission to have 30 seconds of their time. When the 30 seconds are up, ask their permission to continue.

Also, script how you?ll respond to the different possible responses you?re likely to receive from the prospect. For example, if the prospect says they?re not sure they want to meet with you, what will you say?

If the prospect allows you to continue past 30 seconds, tell them you?ll be in their area on a certain day and ask if you could meet with them for 20 minutes to continue the conversation.

Remember that if you?re calling targeted prospects, it?s just a numbers game. Call enough people and you?ll make some appointments. Make enough appointments and you?ll close some sales. Calculating the call to appointments to sales ratio is important in determining if cold calling is working for you.

Warm Calling

You probably have a database of customers and a network of other professionals. Put a simple request out to your database telling them that you have some exciting information, pertinent articles or new products or services and you need to connect with, for example, operations managers in mid-level companies. Ask if anyone knows someone that they could connect you with that fits that category. Offer them a reward, gift certificate or coupon if you feel they need an incentive. If possible, see if they will arrange an introduction by calling or e-mailing this person to let them know about you. Then contact these ?warm? leads. They?ll be much more likely to respond to your communication. To make this work, you must be very clear about what type of person you need to meet. Saying that you need to meet corporate managers, for example, is much too broad. Those in your database also need to feel that you will not make them look bad or take advantage of their contact, so you need to be clear about why you want to meet these types of people.

Focused Networking

If you were an operations or mid-level manager, where would you hang out in your free time? What business and social organizations would you join? What speakers or topics would motivate you to attend a meeting?

If you can answer these questions, you can plan to attend the same meetings or socialize in the same places. There are many swim and golf clubs, for example, that are frequented by corporate executives. Even telling people at church about what you do and who you?d like to meet can yield results. Every industry has it?s own professional organization and most of them welcome guests.

Volunteer to work on a committee.

Offer to speak to one of these groups on a relevant topic.

Offer gift certificates to be used in a drawing at an organizational meeting.

Focused networking means using your networking time in places where you can connect with your target customer or others who can connect you with your target customer. Before you attend even one focused networking meeting, be sure to have a one or two sentence description of what you do and what problems you solve. Make it intriguing, so people want to know more. Is focused networking a quick fix? Nope. It takes time to build relationships. But once you get started, if you gain a few happy customers in the group, chances are they?ll be a ripple effect and you?ll find your business being recommended to others regularly. In addition, you may connect with some people who can become sources for your warm calling campaign.

As a small business owner, it?s important to develop a network of other business owners so you can support each other and share contacts. Consider developing a six month strategy that includes all of these approaches. Be very, very specific about the type of prospect you?re looking for. Track your results so you learn how your time is best spent. I guarantee that six months from now you?ll be looking at some very positive results!

Copyright 2004, Janis Pettit

__________

Janis Pettit, Team Member of Solo-E.com and President of SmarTrack , specializes in improving profit and productivity through small business marketing and growth consulting, business coaching, workshops and tele-classes. As well as owning 4 successful businesses over the last 18 years, Janis hosted her own TV business talk show. Her articles have been published locally and internationally. Janis can be reached at 919-562-2280. _________

***** Find more articles like this at http://www.Solo-E.com ? Keeping Solo Entrepreneurs Juiced in Business and in Life. Our team of Solo Entrepreneurs are comprised of small business experts who support others in finding business success with the flexibility and freedom to have a life, too. Network with other freelancers, self-employed and Solo Entrepreneurs in our forums, enjoy our articles and newsletter, and find other online training opportunities. *****

Article Source: http://EzineArticles.com/

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Posted on August 20, 2005
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Losing purchase (accounting)by Robert Willens

Posted 02:50 EST, 12, Aug 2005

In connection with its persistent efforts to “harmonize” accounting principles wherever possible, the Financial Accounting Standards Board has proposed to alter the manner in which business combinations are accounted for. It, in conjunction with its international counterpart, the International Accounting Standards Board, has issued an exposure draft entitled “Business Combinations” that will replace, should it be adopted, FASB Statement No. 141. Several rather radical changes in the manner in which business combinations are accounted for animate the exposure draft.

In general, the exposure draft provides that all business combinations shall be accounted for by applying a method entitled the “acquisition method.” Thus, the venerable term “purchase method” (of accounting for a business combination) will be expunged.

In the acquisition method, a business combination is defined as a transaction or event in which an acquirer obtains control of one or more businesses. The exposure draft acknowledges that an acquirer may obtain control of an acquiree without a transaction involving the acquirer ? for example, if the acquiree redeems a sufficient amount of its stock (from shareholders other than the acquirer) to place the acquirer in control of the acquiree or where there is a lapse of minority veto rights that, previously, prevented the acquirer from exercising control over the acquiree.

The heart of the exposure draft is its discussion of the acquisition method of accounting for a business combination. Under this method, the acquirer measures and recognizes the acquiree, as a whole, and the assets acquired and liabilities assumed, at their fair-market values as of the acquisition date. The draft provides that the acquisition method entails four distinct steps:

? Identify the acquirer. In a business combination effected through an exchange of equity interests, the entity that issues the equity securities is, normally, the acquirer. However, the exposure draft acknowledges the notion of “reverse acquisitions”; transactions in which the issuing entity is, in fact, the acquiree. Further, in a business combination effected through the exchange of equity interests, the acquirer is, generally, the entity whose owners retained or received the largest portion of the voting rights and, in cases where this guideline is not decisive in determining the identity of the acquirer, the exposure draft goes on to say that the acquirer, “all things being equal,” is the entity that pays a premium.

? Determine the acquisition date. This date is, generally, the “closing” date: the date on which the acquirer transfers the consideration, acquires the assets and assumes the acquiree’s liabilities.

? Measure the fair-market value of the acquiree. The acquirer shall measure the fair-market value of the acquiree, as a whole, as of the acquisition date. For this purpose, the consideration transferred on the acquisition date is presumed to be the fair-market value of the acquirer’s interest in the acquiree. The consideration transferred consists of the acquisition-date fair value of the assets transferred and liabilities assumed as well as the equity interests that are issued and the acquisition-date fair-market value of any noncontrolling equity investment in the acquiree that the acquirer owned immediately before the acquisition date.

In a departure from the purchase method of accounting, the acquisition-date fair value of contingent consideration is also considered to be part of the consideration transferred and, in cases where the contingent consideration is properly classified as a liability and such liability is not within the scope of FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities,” the contingent consideration shall, after its initial recognition, be measured at fair value with changes in such fair value recognized in income.

Moreover, the excess of the fair value over the carrying amount of the noncontrolling equity owned immediately before the acquisition date shall be recognized in income in the period in which the acquisition date falls. This, too, is a departure from previous accounting conventions. Importantly, costs that are incurred “in connection with the business combination” (including legal fees, accounting fees, consulting fees and banking fees) are not part of the consideration transferred and, hence, must be accounted for separately. In virtually every case, these fees will be charged to expense in the period in which the acquisition date falls.

? The acquirer shall then measure and recognize, as of the acquisition date, the assets acquired and the liabilities assumed. The identifiable assets (including “in-process R&D”) and liabilities assumed shall be measured at fair-market value and recognized separately from goodwill. For this purpose, an asset is identifiable when it is either “separable” or it arises from contractual or other legal rights. The often-criticized practice of capitalizing costs associated with restructuring or exit activities is summarily eliminated: To the extent those costs do not meet the recognition criteria in FASB Statement No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” (they rarely will), such costs will not be regarded as liabilities and, therefore, will be recognized separately from the business combination. These costs, therefore, will be expensed, in the post-combination financial statements, as they are incurred. The acquirer shall measure and recognize goodwill, as of the acquisition date, using the “residual” method ? goodwill, therefore, will equal the excess of the fair-market value of the acquiree as a whole over the net amount of the identifiable assets acquired and liabilities assumed. Goodwill shall not be amortized but, instead, shall be “tested,” no less frequently than annually, for “impairment.” What if the acquisition-date fair-market value of the acquirer’s interest in the acquiree is greater than the consideration transferred? How does one account for such a bargain purchase? The excess, in those rare instances where one exists, is first applied to reduce goodwill and, once goodwill is reduced to zero, any remaining excess (of acquisition date fair value over the consideration transferred) shall be recognized as a gain.

This exposure draft, should it be adopted, shall apply to business combinations for which the acquisition date is on or after the beginning of the first annual period beginning on or after December 15, 2006. Until that time, FASB Statement No. 141 remains in full force and effect.

Robert Willens is a tax and accounting specialist at Lehman Brothers Inc. He is also an adjunct professor of finance at Columbia Business School.

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Posted on August 20, 2005
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