Retaining Employees Through Internal Recruiting

May 30, 2019

Abby Roveda, CPA | Senior Accountant | Published by Crow Shields Bailey

Retaining good employees is a challenge that businesses in all industries face—especially public accounting. As companies, we invest a lot of time and resources into the recruiting process so we can find the right employees to join our teams. However, recruiting our employees should not stop at their hire dates. As business owners and managers, we need to continue to spend our time and resources making our company the place that employees want to work as they grow and develop as professionals. There are a few key ways we have implemented an “internal recruiting” initiative at our firm that may work for your business as well.

Provide Leadership Opportunities

If you are hiring team members with the idea that they will one day advance to the top of your company or division, you should start training them on how to be leaders from day one. This not only gives them the skills needed to run the business successfully and manage their peers but lets them know you’re invested in them for the long term and have confidence in their abilities. Create committees that are in charge of certain events or functions within your company; get team members involved in organizations outside of the office; organize gatherings that stir up useful conversation about current events or industry specific topics. When you notice that they have knowledge about a unique skill or topic, encourage them to share it with their peers through a presentation or organized training.

Adapt Roles as Goals Change

The goals and career aspirations of your employees are constantly evolving. Create a mentorship program where employees have the opportunity to talk about their changing goals and aspirations frequently and an environment where they aren’t afraid to ask to try something new. A lot of turnover could be prevented by being adaptive to your employees’ requests. Practical examples of this include: giving them projects outside of their specialty, allowing them to play an active role in management decisions regarding policies that are important to them, or helping them get onto the board of an organization that matches their skills or interests. Adapting as your employees progress in their careers prevents them from feeling limited by their position within your company and shows them that new opportunities are available right where they are.

‘All work and no play makes Johnny a dull boy’

The easiest way to create a place where people want to work is to have fun. We aren’t telling you to throw productivity out the window, but don’t underestimate the power that happy hours, firm outings, and friendly competition can have over employee satisfaction. Creating fun doesn’t have to be a grand production or event that takes a lot of the time and resources of your HR staff. It can be as simple as sending around a link for a trivia quiz and giving out prizes for the highest score or as easy as renting out space at a restaurant to watch a Mardi Gras parade. Our team loves an opportunity to compete whether in cook offs, office pools for sporting events, charity races, or golfing for a good cause.

Create a Culture of ‘Yes’

Are your employees coming to you with suggestions or requests often? If they aren’t, either everything is perfect and you’re doing a great job or they may have assumed the answer would be ‘No.’ That is not to say that there aren’t a lot of times that the answer has to be ‘no’ but, you should embrace every opportunity to say ‘yes’ even if it is inconvenient and might require some extra costs. Saying ‘yes’ is the key to success of all of the concepts we have already discussed above. The time and money that goes into saying ‘yes’ to making changes, granting requests, and supplying opportunities for your team to bond are part of your investment in employee retainage.

Getting Started

The best way to implement an ‘internal recruiting’ initiative of your own is to start talking to your employees. That’s the easiest way to find out what their goals are, what leadership opportunities make sense for them, and how they like to have fun. From there, all you have to do is start saying ‘yes.’

CSB’s Guide to Understanding Classification and Accounting for Leases Under ASU 2016-02

July 26, 2018

Kirsten Sokom, CPA | Supervisor | Published by Crow Shields Bailey

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02 on Topic 842 for leases, introducing a principles-based approach in classification and accounting for lease agreements.

 

The changes under the new standard will require most leases to recognize a lease liability and a related right-of-use asset on the balance sheet, regardless of whether or not it is considered an operating or capital lease. ASU 2016-02 becomes effective for public companies’ fiscal years beginning after December 15, 2018. For all other organizations, the standard is effective for fiscal years beginning the following year, December 15, 2019; however, early adoption is permitted. This article summarizes classification and measurement of leases under the new standard.

 

Lease Classification

ASC 842 revised the lease classification criteria as outlined in ASC 840, and those new standards are as follows:

  • Does the lease transfer ownership to the lessee by the end of the lease term?
  • Does the lease contain a purchase option that the lessee is reasonably certain to exercise?
  • Is the lease term a major part of the remaining economic life of the asset?
  • Is the sum of the present value of the lease payments and any residual value guaranteed by the lessee equal to or greater than substantially all of the fair market value of the assets?
  • Is the underlying asset of a specific nature such that it would have no alternative use to the lessor?

If any of the above lease criteria are met, the lease is classified as a finance lease (formerly known as a capital lease). If none are met, the lease is classified as an operating lease. The classification of lease agreements under ASC 842 is similar to current guidance under ASC 840. One change to note is that the 75 percent and 90 percent bright-line tests are no longer included in lease classification criteria; however, ASC 842 indicates that these bright-line tests are acceptable criteria in determining the definition of “major part” or “substantially all.”

 

Operating Leases and the Short-Term Lease Election

Under current guidance (ASC 840), operating leases are not recorded on the balance sheet. This will change under ASC 842. Operating leases will generally be required to be recorded on the balance sheet unless certain exceptions are met, which will result in the addition of a right-of-use asset and the related liability for each operating lease asset.

One of these exceptions is the short-term lease election. Operating leases qualifying for this treatment are not required to be capitalized. Accounting under the short-term lease election would result in similar treatment for an operating lease under the current standard. However, to choose the short-term lease election, the initial lease term and all renewal options reasonably certain to be exercised must not exceed 12 months.

 

Initial Measurement

Initial measurement for operating and finance leases under ASC 842 are the same. The lease liability is calculated based on the present value of unpaid lease payments. This amount will also serve as the right-of-use asset’s cost basis, assuming there are no initial direct costs, prepaid lease payment, or lease incentives received to be taken into account.

 

Subsequent Measurement

While initial measurement is treated the same under ASC 842, subsequent measurement varies for operating and finance leases. For finance leases, the lease liability is reduced using the effective interest method. The interest portion is shown as interest expense on the income statement. The right-of-use asset will be reduced on the straight-line basis over the shorter of the expected lease term or the useful life of the asset. Amortization expense will also be presented on the income statement. If there are variable lease payments also associated with the finance lease, the payments will be classified as rent expenses.

With regard to operating leases, the lease liability is subsequently measured based on the present value of the unpaid lease payments using the effective rate of interest upon lease commencement. The right-to-use asset will be measured at the carrying amount of the operating lease liability while also considering any reduced initial direct costs, prepaid or accrued lease payments, and lease incentives received. On the income statement, both the amortization expense of the right-to-use asset and the recognized interest expense will be shown together as rent expense.

ASC 842 also requires reassessment and remeasurement of the lease if there have been significant changes to the lease term or other aspects of the lease. If you have questions about whether your lease needs to be reassessed, our CSB team is prepared to assist your specific situation.

Consensus surrounding the new standard suggests that finance leases will be more desirable due to the required calculations and disclosure requirements for operating leases. While the ASU 2016-02 language indicates that each lease agreement must be evaluated individually, the FASB has released transition guidance including several practical expedients that may be utilized upon implementing ASC 842.

 

If you have questions regarding how your current lease agreements will be categorized or measured under ASU 2016-02, give us a call. We are happy to provide guidance regarding changes in reporting requirements and your company’s financial performance under the new standard.