Many of the duties performed by accounting professionals are intended to bring a sense of predictability to businesses, clients, and the business world.
CPAs like budgeted amounts to match the actuals, forecasts to hit the target, rules to be easily applied, and financial statements to not lead to audit issues or restatements.
But 2020 is shaping up to be a year dominated by factors that are largely out of CPAs' control. In the AICPA Business & Industry Economic Outlook Survey for the third quarter of 2019, domestic economic conditions ranked higher on the list of businesses' challenges than at any time since the third quarter of 2016. In the same survey, domestic political leadership ranked higher on the list of challenges than at any time since the fourth quarter of 2012.
Meanwhile, until recently, respondents to Deloitte's CFO Signals survey said internal risks were more worrisome than external risks. In the third quarter of this year, that shifted. Amid uncertain U.S. trade policies, Brexit controversy, and worldwide economic turbulence, CFOs rated outside risks as more concerning than internal risks.
"This makes 2020 budgeting a real challenge," said Sandy Cockrell, CPA, managing partner of Deloitte's CFO program.
With these external factors in play, many CPAs are approaching the year with caution and conjuring memories of the tactics they used to stay afloat during the most recent global financial crisis.
The political turbulence of a presidential election year in the United States also is likely to affect hiring and investing.
"With 2020 being an election year and the uncertainty over the outcome of that election, I'm anticipating most companies taking a wait-and-see approach when it comes to investment and expansion," said Bob Sannerud, CPA, CGMA, the CFO of Life Link III, a provider of emergency air medical transportation in Minnesota. "It will be more of a stay-the-course year."
Here are some other things to expect as 2020 approaches.
ACCOUNTING AND AUDITING
Next year should be less frantic for many financial statement preparers as a result of FASB's delay in implementation dates for private companies and certain other preparers for accounting standards for leases, credit losses (known as CECL), and hedging.
But FASB proposed the delay with the idea that preparers would continue to work on implementation in a more comprehensive way to enable the improvement of systems and processes instead of just focusing on compliance. Companies that leave themselves time to carefully implement the lease accounting standard are finding ways to create economies of scale, cut costs, choose the best systems, and in some cases even eliminate spending that could be deemed wasteful because it wasn't closely monitored.
"I think the silver lining in the implementation of the leasing standard is that some companies realize they have been overpaying on some leases," said Mike Cheng, CPA, national professional practice partner with Frazier & Deeter in Atlanta. "Or they found a better process in tracking their leases by centralizing the function. If properly implemented, companies may actually spend less time recognizing, measuring, presenting, and disclosing lease arrangements for financial reporting."
Meanwhile, the CECL effective date will have a significant effect on public business entities that are SEC filers at the beginning of next year. The standard requires a more forward-looking approach to loan loss reserves and is one of the most significant and challenging new standards financial institutions have ever implemented. Detailed financial credit risk modeling and forecasts based on observable past data will be required for loan loss estimates, and it's widely perceived that publicly traded financial institutions will be well prepared for the change because it has been so heavily emphasized.
Perhaps because the standard's effect on financial institutions is so well known, there is a concern that other companies aren't taking the standard seriously enough. Allowances for uncollectible trade receivables, for example, may be subject to the CECL standard and require new methodologies from a wide variety of companies.