Accounting reportSept. 10, 2012

IRS clarifies tax rules for building improvements

North Bay CPAs optimistic on economy

Accounting column: Santa Rosa CPA publishes retirement guide

Accounting leaders from around the U.S. reported a lower economic outlook for the third quarter but higher confidence than the same time in 2011, and North Bay experts are noting more positive observations on the local economy.

Part of a quarterly U.S. Economic Outlook Survey by the American Institute of Certified Public Accountants, the group's CPA Outlook Index fell four points to 63 for the third quarter, according to the report, released Thursday. The index represents input from AICPA members who hold executive positions as CPAs in private and public institutions across a broad spectrum of sizes and industries.

A figure above 50 is a positive outlook. Yet, the index has declined for two consecutive quarters. Concerns about the U.S. economy were the strongest driver in the index decline, according to the report.

Still, the outlook is better than that of the third quarter of  last year, when the composite index was 58. And it's well above the lowest point -- 32 for the first quarter of 2009.

Respondents noted they are less likely to hire than the previous quarter. However, despite a quarter-to-quarter decline of 3 points in the AICPA's hiring index, that outlook remained positive at 59.

More detailed outlooks were varied in the national survey. Ten percent reported too many employees in their organizations. Another 10 percent expected to hire. Fifty-eight percent were satisfied with staffing, while 21 percent were hesitant about necessary hiring.

For North Bay accounting leaders, who regularly connect with a variety of industries, the local outlook for many sectors has improved, though many companies have changed their practices after weathering the recession.

"I think it will be the norm for companies to maintain higher amounts of cash and working capital in general," said James Perez, partner at Pisenti & Brinker LLP. "My impression is that increased hiring is a reaction to more demand for products and services. I don't think companies are necessarily depleting cash reserves to hire additional workforce, but are instead using increased operating cash flow to cover the cost."

More than 1,300 financial executives responded to AICPA's quarterly survey. All nine metrics reflected a positive year-over-year trend, including plans to expand in the next 12 months, expectations for revenue and profit growth, deployment of capital reserves and hiring.

The largest year-over-year gain -- 16 points -- was in optimism toward the national economy. The strongest positive consensus included expectations for revenue and technology spending, each with an index of 72.

"We have seen hiring pick up and increased optimism with our clients," said Christopher Paris, a partner at Moss Adams LLP in Santa Rosa. "Surprisingly, this is occurring in industry sectors such as construction. I think the 200,000 so or of jobs added in August nationwide is also indicative of this trend."

However, Joe Standridge of Standridge & Associates in Santa Rosa noted that the recession continued to present challenges for his clients. That parallels the quarter-to-quarter declines in AICPA indexes, particularly in respect to economic confidence.

"Now, still to this day, I probably get a call a week from a new client looking for advice on a foreclosure," he said. "I'm seeing smaller businesses struggling, with credit lines tightening."

Respondents to the AICPA survey listed the upcoming elections and job outlook as top concerns, regardless of economic outlook. Domestic economic conditions, regulatory changes and employee and benefit costs were their top concerns for the quarter. Top concerns for those with a "pessimistic" outlook were debt, spending and government, and for the "optimistic" it was meeting increasing demand.