My AICPA is ...

2009-2010 Annual Report

Table of Contents
Message from the Chairman and President & CEO . . . . . 1

Advocating on Behalf of the Public Interest,

Members and Profession . . . . . . . . . . . . . . . . . . . 7

Setting 21st Century Standards . . . . . . . . . . . . . . 11

Making a BIG Impact . . . . . . . . . . . . . . . . . . . 15

Providing Members the Tools to Succeed . . . . . . . . . 19

Securing the Future through Leadership . . . . . . . . . 23

Financial Statements . . . . . . . . . . . . . . . . . . . . 29
 Message from
the Chairman and President & CEO

As we meet with members across

What does the the country, we hear stories
about how committee service has
AICPA mean provided valuable opportunities
for networking and learning.
to you? Others share stories of how
their work with our 360 Degrees
of Financial Literacy campaign
has touched the lives of people in their communities.
Many underscore their need and appreciation for our
educational resources. Whether it is reading our daily,
weekly and monthly publications; expanding your
competencies through our conferences; saving money
with our affinity programs; or utilizing any of our myriad
other offerings, members from around the nation have
found that the AICPA plays an invaluable role in their
professional lives.

You are part of a diverse group engaging in a wide

range of activities, pursuing numerous priorities and
holding different expectations. Still, we strive to help
each one of you perform at the highest levels, serve
the public interest, stay informed on important issues
affecting CPAs and achieve success. That’s what the
AICPA means to us.

We’re proud of how well the Institute’s efforts reflect

all your varied interests. Our work centers around
what you’ve told us you wanted through member
surveys, focus groups and personal contact. Advocacy in
Washington and an improved website consistently came
out on top and we delivered for you on both this past
year, along with many other things you’ve cited.

As the largest and most respected professional

organization for CPAs, the AICPA fought tirelessly
for you and the public on Capitol Hill and on Main
Street, in spite of the lingering recession and
bumpy recovery. It truly was the
busiest year that we can recall
for legislative activity. But it was
worth it because we achieved
some significant victories that
honor the public interest and
protect CPAs’ unique function in
the United States for businesses
and individuals. For example,
thanks to a monumental effort,

• Robert R. Harris, CPA/CFF | Chairman of the Board

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 Congress agreed to recognize CPAs’ “customary and Financial Reporting Standards (IFRS) move closer to
usual” services when it crafted bills for the Consumer eventual adoption for U.S. public companies, the AICPA
Financial Protection Bureau (CFPB) as part of sweeping continues to help you prepare for the new financial
financial reform legislation. Covering CPAs’ financial reporting system. Daily IFRS updates are posted to our
advice and counsel to clients, as well as financial-literacy IFRS resources website, IFRS.com, which also houses
discussions, under the CFPB would have resulted in articles, FAQs, a backgrounder, videos, a monthly
duplicative and unnecessary regulation in light of CPAs’ newsletter, training courses and more. Not surprisingly,
appropriate regulation by state boards of accountancy. our semiannual IFRS Readiness Survey shows you
Likewise, we helped preserve private sector, independent continue to improve your familiarity with IFRS. Nearly
standard setting for the Financial Accounting Standards half (47%) of CPAs in the spring 2010 survey said they
Board (FASB) by stopping a legislative amendment that already have basic knowledge of IFRS, an advancement
would have jeopardized it. The Center for Audit Quality from 39% who had basic knowledge in October 2008.
(CAQ), which is affiliated with the AICPA, joined in At the same time, there’s been a decline in those saying
that effort. they have no knowledge of IFRS; 16% now versus 30%
in October 2008. These trends are important because
We also defended our members who serve or IFRS already is an active financial reporting framework in
work for private companies by being the strongest this country. In fact, IFRS questions will start to appear
advocate for change in the financial reporting on the CPA Exam in 2011 and a certificate program to
standard-setting process to accommodate demonstrate IFRS knowledge is under development.
differences for private companies. The AICPA
led the call for a new blue-ribbon panel to make Many of you are tax practitioners and we have been
recommendations on the future of private company intensely involved on numerous tax issues. Regarding
financial reporting. Unlike previous efforts that focused the new Internal Revenue Service (IRS) tax-return preparer
on making changes in existing or proposed standards registration program proposed earlier in 2010, our primary
for private companies, the panel’s work will lead to a goal was to make sure CPAs did not bear undue regulatory
policy-level decision. The panel’s recommendations, burdens. Thus, as the IRS initially considered aspects of the
which are expected by the end of 2010, will include program, we strongly opposed the redundant examination
whether a separate board is needed to set and continuing professional education requirements for
private-company standards, and we believe it is. The CPAs, and the IRS agreed. We are continuing to work with
18-member panel already has decided that the status
quo is not an option, meaning appropriate changes to
GAAP are more likely than ever. The AICPA created
the panel with the Financial Accounting Foundation,
FASB’s parent organization, and the National Association
of State Boards of Accountancy.

Furthermore, we continue to shape standard setting

by identifying practice issues, providing accounting
and auditing guidance, and moving standard
setters to take action. For instance, the convergence
projects by the FASB and the International Accounting
Standards Board (IASB) will mean significant
changes in financial reporting in the future. Revenue
recognition and leases are but two that affect virtually
all businesses. We not only are commenting on the
proposals to make sure they will be effective and can
be implemented, but also are developing summaries,
guides, videos and FAQs so you will be ready when
these major standards are released by the end of 2011.

Another standards initiative this year that is

important to note relates to the convergence of
accounting standards just mentioned. As International
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the IRS regarding additional guidance that may extend Other AICPA websites unveiled redesigns, too.
similar treatment to non-signing preparers who serve Our financial-literacy website for consumers,
under a qualifying individual in certain professional firms, 360 Degrees of Financial Literacy, now offers the
such as a CPA firm. Furthermore, preventing confusion public personalized tools and information to better
in the marketplace about what consumers are getting manage their finances. Since its April 2010 launch, it has
with the varying tax preparers who would be listed with been honored with two awards and averages 125,000
the IRS is a priority as well and one of the reasons we’ve visits per month. The acclaimed student recruitment
asked the IRS to delay implementation of the exam for any website “Start Here, Go Places.” introduced a FutureMe
practitioner. We believe slowing down, getting it right and feature to enable students to learn about various career
doing a cost/benefit analysis will help the IRS make the paths. A new website, This Way to CPA, launched in
correct decisions. You’ve been an important part of this September 2010, focuses on college students and
whole process – thousands of you wrote to the IRS about young professionals studying for the CPA Exam.
your concerns after a special AICPA News Update outlined
our issues. As a founding organization of the Enhanced
Business Reporting Consortium, a member of the
Moreover, we agreed with you that our information, World Intellectual Capital Initiative network, we’ve
tools, news and resources have to be easily and long focused on sustainability, an area of business
quickly accessible for them to provide value to you. reporting that considers the environmental and
We’re especially pleased with the debut this year of a social aspects of conducting business along with
completely new AICPA.org. Based on member input, profitability. We have enjoyed much success this year
user needs and industry best practices, the website engaging our profession on this issue. The world is
features improved search, enhanced navigation, the looking to us for advice and guidance in this area.
selection of AICPA publications and emails, videos, We are the professionals best positioned to see the
social media, RSS feeds, content ratings and more connections among strategy, risk, financial performance
member-exclusive content. In addition, the new and reporting – all essential elements of sustainability
My Account functionality enables you to easily reporting, as well as more transparent corporate
manage your membership online. reporting in general. We strongly supported forming
the International Integrated Reporting Committee
to oversee development of a globally accepted
integrated reporting model. The AICPA is a member
of The Prince of Wales’ Accounting for Sustainability
Project (A4S), a consortium of public and private entities
around the globe. As part of A4S, the AICPA is one
of the founding members of the Accounting Bodies
Network formed in 2010 to support the work of the A4S
in the accounting profession worldwide. A hands-on
workshop was developed to help participants design
a strategic sustainability initiative at their companies.
A new webpage was created to house information
and resources regarding sustainability accounting,
sustainability reporting, sustainability assurance, tax and
other services. An overview of sustainability and our
involvement is summarized in Integrated Reporting –
A New Model for Corporate Reporting.

Members in business and industry also could turn

to a number of tools the AICPA provided, including
guidance on the implications of Standard & Poor’s
considering enterprise risk programs in credit
reviews of non-financial issuers. White papers on the
critical issues of enterprise risk management, internal
control and corporate governance were published to
help CPA financial executives and government

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 organizations as they face challenges in these areas. The
AICPA also produced a primer on health-care reform to
help you lead your organization to success. Our quarterly
economic outlook survey, widely distributed to the
media, continues to showcase CPA financial executives
as broad-based businesspeople with expertise on the
country’s economy and market forces.

Do you work in a small or regional firm? The PCPS Client

Service Resource Center and the Economic Podcast series
were designed to help you address client retention, fee
pressures, cost cutting and other critical issues. In addition,
our subsidiary, CPA2Biz, helped small- and medium-firm
members better serve clients and increase revenue with
improved use of cloud computing. Thanks to three new
alliances established this year in the AICPA Trusted
Business AdvisorSM Solutions program, you can access
leading-edge technology for audit confirmations,
tax-document automation and workflow management.

Partnering with CPA2Biz, the AICPA launched a

technology solution that makes it easier for you to track
the status of your CPE and chart pathways for improving
your competencies. Through the AICPA Learning Center,
you can quickly access more than 100 AICPA CPE self-study
courses, web events and virtual conferences, as well as obtain
transcripts and print certificates of completion. More features
will be rolled out over the coming months, including a
compliance tracker and firm-administration customizations.

As you can see, your AICPA is our AICPA and vice versa.
We have continued to keep our focus on your needs and
what you look to us for so you can succeed. Please join us in
celebrating all of the AICPA’s accomplishments and activities
this past year designed to deliver the value you demand and
deserve from your membership. We proudly present our
2009-2010 Annual Report, titled “My AICPA is …”

Robert R. Harris, CPA/CFF Barry C. Melancon, CPA

Chairman President & CEO

• Barry C. Melancon, CPA | President & CEO

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“We’re proud of how well the
Institute’s efforts reflect all
your varied interests. Our work
centers around what you’ve
told us you wanted through
member surveys, focus groups
and personal contact.”
Robert R. Harris, CPA/CFF and Barry C. Melancon, CPA

Advocating on Behalf of the
Public Interest, Members
and Profession

The Institute relentlessly endeavors to protect

its members and the public interest from
unnecessary regulatory burdens, as well as
promote awareness of and confidence in the
integrity and competence of CPAs.
 Advocating on Behalf of the Public Interest,
Members and Profession

Influencing Financial Regulatory Reform Supporting the PCAOB

• Financial regulatory reform was one of • When a Supreme Court ruling in June effectively
Washington’s top priorities this year, making affirmed the Public Company Accounting
it perhaps the AICPA’s busiest time ever for Oversight Board’s (PCAOB) constitutionality,
legislative advocacy. The Institute successfully AICPA President and CEO Barry Melancon called
orchestrated the defeat of a proposed “aiding it “a victory for investors and for the accounting
and abetting” amendment that could have profession.” He added that “the court rejected a
extended civil liability to secondary parties, such transparent attempt to undermine the post-Enron
as accountants, in securities lawsuits. Support from reforms that have served our financial markets
state CPA societies, firms and federal key person well.” Under the ruling, board members now are
contacts boosted the effort. subject to “at will” removal by the Securities and
Exchange Commission (SEC).
• The AICPA also was victorious in its work to
help Congress understand that CPAs already are
sufficiently regulated, enabling the profession to Representing Members’ Tax Interests
escape duplicative and unnecessary rules under the
Consumer Financial Protection Bureau for CPAs’ • The Institute raised critical questions about the
customary and usual accounting services. IRS’s initiative to register tax-return preparers.
The IRS agreed with the AICPA’s argument that its
• At the same time, the AICPA offered strong examination and continuing professional education
and unequivocal support for the continued requirements duplicated existing licensing
independence of the FASB to keep the requirements for CPAs. The AICPA is continuing to
accounting standard-setting process free of work with the IRS regarding additional guidance
political pressure. The CAQ, which is affiliated with that may extend similar treatment to non-signing
the AICPA, joined in this effort. preparers who serve under a qualifying individual
in certain professional firms, such as a CPA firm.
• On another front, the Institute opposed efforts to The Institute also plans to continue working with
weaken some of the investor protections under the IRS to ensure that the public is not misled
section 404(b) of the Sarbanes-Oxley Act, which about the assumed qualifications or experience of
requires that a company’s annual report include tax preparers listed with the IRS, which is one of
an auditor’s attestation report on management’s the reasons the AICPA has asked the IRS to delay
assessment regarding internal controls over implementation of the exam for any practitioner.
financial reporting. In the end, only companies
with market capitalization of $75 million or less
are exempt from the requirement.

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 The Institute estate and generation-skipping transfer taxes
to prevent continuing uncertainty and delays in
estate planning and administration. The Institute
raised critical also offered Congress a priority list of suggested
reforms in estate and gift taxes. CPAs grappling

questions about with estate tax gap administration issues could

turn to a variety of practical free resources,

the IRS’s initiative including a webinar, PowerPoint presentation

and informative articles. The Institute also

to register tax-
partnered with the National Association of Estate
Planners and Councils to promote estate planning
to practitioners and their clients by offering web

return preparers. seminars and resources during Estate Planning

Awareness Week.

• Our Tax Reform Alternatives for the 21st

• Even though the AICPA urged the IRS to drop Century study, published late last year,
its plans to require companies to disclose discussed the reasons that change is needed,
uncertain tax positions (UTP) in their annual tax enumerated reform options and examined income
returns, the IRS moved forward with requiring such versus consumption taxes and other related issues.
disclosures. However, the final guidance includes
many changes and modifications from the initial
• The AICPA spoke out against a proposed
proposal, reflecting comments the IRS received
amendment that would tax income and gain
from the AICPA, other organizations and taxpayers.
from an “investment services partnership interest”
For example, instead of the required disclosure
not as capital gains but as ordinary income.
regime being effective for 2010 for taxpayers with
assets of $10 million or more as initially proposed, it
• The AICPA called for repeal of a section of the
will now be phased in over a five-year period based
new health care law that requires businesses
on a corporation’s asset size. In addition, there is
to report to the IRS any purchase worth $600
no reporting of a maximum tax adjustment, no
or more. The Institute argued that compliance
reporting of the rationale and nature of uncertainty
would be burdensome and costly for small
in the concise description of the position and no
businesses, and that the information would not be
reporting of administrative practice tax positions.
of meaningful value in collecting unpaid taxes.
The AICPA continues to work with the IRS on the
UTP requirements. Access AICPA comment letters,
• Long an advocate against tax strategy patents,
all of the IRS pronouncements on uncertain tax
the AICPA renewed its call for legislation
positions and AICPA coverage of the issue from an
banning them. AICPA President and CEO Barry
AICPA resource page.
Melancon in June noted that even though the
Supreme Court decision in Bilski v. Kappos strikes
• In a letter to the Senate Finance Committee
down one business method patent, it did not go
and the House Ways and Means Committee,
far enough, and the U.S. Patent and Trademark
the AICPA in early 2010 urged fast action on
Office continues to issue tax strategy patents.

8
• In the wake of major health care reform to 47. Legislation is pending in two additional
legislation, the Institute last spring published states. The Institute continues to work with the
Health Care Reform – What It Means for CPAs. remaining jurisdictions to advocate for mobility
This primer helps CPAs in practice and in industry legislation, and also is focusing on implementation
understand the implications of the new law to in states that have passed it.
effectively advise their clients or organizations.
• Comment points from the AICPA and the
• Institute members once again could take CAQ were reflected in final amendments
advantage of updated tax season campaign to SEC rules on custody and recordkeeping
resources that help educate clients about tax under the Investment Advisers Act of 1940. The
law changes, including a brochure, a speech and Institute recommended a reduced scope, risk-
a PowerPoint presentation. Firms can imprint their focused approach to surprise examinations and
names and logos on the brochure. revisions in proposed internal controls examination
requirements.

Advocating for Our Members

• Under the Federal Trade Commission’s (FTC) “Red

Flags” rule, organizations that could be defined
as creditors or financial institutions generally must
implement written programs to prevent identity
theft. The FTC had taken the position that CPAs
were subject to the rule, but in light of AICPA and
state society advocacy, along with the AICPA filing
a lawsuit against the FTC, enforcement of the
Red Flags rule has been delayed. However, since
the Red Flags rule may apply to CPAs’ clients and
employers, the AICPA created a comprehensive
resource page to help members understand the
rule and how it may apply to them, when and if it
ever becomes effective.

• In a tremendous success story for the

profession, two additional states have enacted
legislation that allows CPAs licensed in another
state to practice in their state, bringing the total

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Setting 21st Century
Standards

The Institute is proactive in the development,

revision and updating of standards to meet
the needs of the 21st century CPA profession –
influencing standard setters and crafting guidance
for more effective implementation of standards.
 Setting 21st Century
Standards

Enhancing Financial Reporting Standards • The AICPA continues to lead the way in
supporting serious consideration of adoption
• In an effort to examine the future of financial of International Financial Reporting Standards
reporting for private companies from a (IFRS) for U.S. public companies. In a statement
policy-level perspective and decide whether on the SEC’s Work Plan to incorporate IFRS into the
separate, stand-alone standards or a separate U.S. financial reporting system, the AICPA voiced
standard-setting board were necessary, the its support for a single set of high-quality,
AICPA, along with the Financial Accounting globally accepted financial reporting standards
Foundation and the National Association of and the thoughtful and concrete steps the
State Boards of Accountancy (NASBA), formed Commission is taking to prepare for the transition.
a blue-ribbon panel. The panel, which solicited
public comments from constituents of private • The AICPA’s IFRS website continues to provide
company financial reporting, plans to make its resources and information for members. The many
recommendations by the end of 2010. timely and practical tools include a wiki, which

In an effort to examine the future

of financial reporting for private
companies from a policy-level
perspective and decide whether
separate, stand-alone standards or a
separate standard-setting board were
necessary, the AICPA, along with the
Financial Accounting Foundation
and the National Association of
State Boards of Accountancy, formed
a blue-ribbon panel.

11
 debuted this year, that compares IFRS for Small significant changes to the compilation and
and Medium-sized Entities with corresponding review standards since 1978.
sections of U.S. GAAP.
o Among the most important changes, SSARS
• To maintain high standards in federal No. 19 allows CPAs to disclose in the
government financial reporting, the AICPA accountant’s compilation report the reasons
governing Council in May 2010 authorized the for an independence impairment. It also
continued recognition of the Federal Accounting separates review guidance and compilation
Standards Advisory Board (FASAB) as a standard guidance.
setter under Rule 203 of the AICPA Code
of Professional Conduct. FASAB sets federal o The abundant implementation resources
government accounting standards that are used by available to practitioners include a summary
federal agencies and by the federal government in of SSARS No. 19 and two white papers:
the preparation of financial statements. Significant Change to Compilation Reporting
Requirements When Independence Is Impaired
• The AICPA Webcast “XBRL – Preparing for and Understanding Internal Control and Internal
Phase II and Detailed Tagging,” alerted public Control Services.
companies to the issues surrounding an SEC
requirement. The January presentation was •A
 fter listening to member feedback, the
designed for chief financial officers; controllers; Auditing Standards Board (ASB) agreed to push
accounting and finance managers; and CPAs the effective date of the standards developed
working with clients who prepare financial under the Clarity Project to periods ending
statements. Its goal was to help them comply with after Dec. 15, 2012. Because of the postponed
the SEC’s rule to submit financial statements in effective date, members would have sufficient and
eXtensible Business Reporting Language (XBRL), an appropriate time to educate and train their staff
Internet-based standard. The AICPA has endorsed and to properly incorporate the standards into their
and supported XBRL from its inception. audit methodologies. The ASB launched its Clarity
Project in 2007 to make the auditing standards
simpler to read, understand and apply, as well as
Providing Guidance on Standards to converge them with International Standards on
Auditing published by the International Auditing
• The AICPA Reliability Project in 2008 considered and Assurance Standards Board (IAASB).
the need for changes in the standards for
compilation and review engagements.  o ease implementation, the AICPA split the
•T
guidance contained in Statement on Auditing
o Partially in response to that project, the Standards (SAS) No. 70, Service Organizations,
Accounting and Review Services Committee into two separate standards: Statement on
in December 2009 issued Statement on Standards for Attestation Engagements (SSAE) No. 16,
Standards for Accounting and Review for use by service auditors; and a new clarified SAS
Services (SSARS) No. 19, Compilation and for user auditors. To promote better understanding
Review Engagements, which makes the most of these changes, the AICPA developed an FAQ on

12
 SSAE No. 16 and a related webcast, along with an Promulgating Ethics
article explaining the transformation of SAS No. 70.
To help members respond to market and customer • The AICPA Professional Ethics Executive
needs, the AICPA also developed a framework for Committee issued Interpretation No. 101-17,
reports on a service organization’s financial and “Networks and Network Firms,” under
non-financial controls, called Service Organization Rule 101, Independence, to provide guidance
Control (SOC) Reports (formerly known as SAS 70). to firms that form networks with other firms
This series includes three reporting options: SOC 1 and entities to enhance their capabilities to
for SSAE 16, for reports on controls at a service provide professional services. Implementation
organization that have an impact on a user entity’s guidance clarified how to use the rules in practice.
internal control over financial reporting; SOC 2
for reports on controls at a service organization • The AICPA launched an Ethics Codification
over security, availability, processing integrity, Project that will reformat and enhance the
confidentiality or privacy; and SOC 3, a report profession’s ethics guidance literature to make
covering the same subject matter as SOC 2, but in it more intuitive and user-friendly, as well as
a short-form, general-use format that can be used consider convergence of U.S. ethics standards with
in a service organization’s marketing efforts. international rules where appropriate.

• The AICPA revised its Statements on

Standards for Tax Services (SSTSs) to respond
to practitioners’ comments and incorporate
needed updates. Among the changes, the
revised SSTSs now specify that the standard for
undisclosed tax positions is the higher of the
standard of the applicable taxing authority or a
“realistic possibility of success.” Additionally, the
revised SSTSs reflect an increase in the standard
for disclosed positions from “not frivolous” to
“reasonable basis.” The statements offer CPAs
guidance on appropriate tax practice standards
and demonstrate the profession’s commitment to
high-quality tax services.

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Making a BIG Impact

The Institute helps business, industry and

government members with their professional
needs, providing strong support on timely
business issues, as well as resources and expertise
on need-to-know industry subject matter.
 Making a BIG Impact

Members Lighting the Way Institute of Management Accountants (CIMA)

surveyed their business and industry members
• CPA decision-makers have their pulse on in partnership with the Enterprise Risk
the business environment and the market Management Initiative at North Carolina State
forces at work. The quarterly AICPA Business & University (the NCSU ERM Initiative). The results
Industry Economic Outlook Survey, conducted in of the survey were published jointly by the AICPA,
collaboration with the UNC Kenan-Flagler Business CIMA and the NCSU ERM Initiative in Enterprise
School, examined viewpoints on the current Risk Oversight: A Global Analysis. The report
economy, the state of individual organizations indicates that universally, financial executives are
and anticipated future economic prospects and feeling pressure to re-evaluate and improve their
challenges. Survey results are widely distributed to overall approach to enterprise risk management.
the media, educating the public about economic
issues and showcasing CPAs’ leadership in •A
 Government Accountability Brief, Enterprise
financial matters. Risk Management: Is it Relevant to Government?,
explained that the need for robust enterprise
risk oversight is relevant to all types and sizes of
Managing Risk organizations, including governmental entities.

• The economic crisis and perceived insufficient

company control systems have led to a growing Examining Fraud
demand for thought leadership on enterprise
risk management (ERM). To help CPAs address • Another study the AICPA worked on as a
this market need where CPAs could fill an member of COSO was Fraudulent Financial
important role, the AICPA has developed a new Reporting: 1998–2007, An Analysis of U.S.
webpage on ERM housing numerous resources for Public Companies, a comprehensive analysis
members in business, industry and government. of 347 alleged accounting fraud cases the SEC
investigated between January 1998 and December
• A special brief was published to provide an 2007. The study’s results are useful to boards of
update on Standard & Poor’s plan to integrate directors, external auditors, investors, regulators
evaluations of ERM programs into its credit review and other key stakeholders in their efforts to
process for non-financial corporate issuers. prevent, deter and detect fraudulent financial
reporting. The AICPA offered a webinar and a
• As an active member of the Committee of PowerPoint summarizing the study’s findings.
Sponsoring Organizations of the Treadway
Commission (COSO), the AICPA participated in
preparing a paper from COSO titled Effective Leading the Sustainability Conversation
Enterprise Risk Oversight: The Role of the Board
of Directors, which examined the challenges • The Institute already has made significant strides in
for boards and the benefits of enterprise risk becoming a thought leader in the sustainability
management. area and is a prime source of sustainability
resources for the accounting profession. As a
• To find out how audit committees, CFOs and founding member of the internationally focused
others are addressing ERM globally in their Enhanced Business Reporting Consortium (EBRC),
organizations, the AICPA and the Chartered and having established the Special Committee on

15
 Enhanced Business Reporting before that in 2003, • The AICPA also strongly supported the
the AICPA has long focused on sustainability, which formation of the International Integrated
considers the environmental and social aspects of Reporting Committee, created to oversee
conducting business along with profitability. development of a globally accepted integrated
reporting model.
•The AICPA last year became one of the founding
members of the Accounting Bodies Network of • The AICPA last fall submitted a comment
The Prince of Wales’ Accounting for Sustainability letter to the Climate Disclosure Standards
Project (A4S). The forum’s principles promote Board (CDSB), a consortium of business and
integrated or “connected reporting”– reporting environmental organizations, on the board’s
that links an organization’s sustainability impacts draft framework for Climate Change Reporting.
with its financial performance more clearly, AICPA staff members were invited to join the
concisely and consistently. board’s technical working group developing the
framework.

The AICPA last year became one

of the founding members of the
Accounting Bodies Network of The
Prince of Wales’ Accounting for
Sustainability Project. The forum’s
principles promote integrated or
“connected reporting”– reporting
that links an organization’s
sustainability impacts with its
financial performance more
clearly, concisely and consistently.

16
• The Institute joined with the CDSB, A4S and Addressing Government Members’ Needs
12 major accounting institutes around the
world in sending an open letter to political • Recognizing that members in government face
leaders attending the United Nations Climate issues and challenges different from members in
Change Conference in Copenhagen. It called for business and industry, several specific resources
a single set of universally accepted standards for were developed for this group. One is the
climate change-related disclosures. The Institute Government Accountability Brief, Internal Controls:
also commented on an IAASB paper addressing Just the Start of a Fraud, Waste and Abuse
assurance on greenhouse gas statements. Prevention Program, which discusses the need for
and importance of fraud prevention programs in
• Other helpful resources for members include government.
guidelines on environmental accounting and
scenario planning, and a web presence for the • A PowerPoint presentation encouraging
AICPA sustainability initiative, providing a variety of students to pursue an accounting career in
resources to help CPAs understand sustainability government has been given at various universities
accounting, reporting, assurance, tax and other and organizations by the Government Performance
sustainability issues. These resources and the and Accountability Committee. Top 5 Reasons
AICPA’s activities demonstrate that sustainability Government Accounting Provides a Great Career
is not about the politics of “going green,” but has been downloaded more than 10,000 times
about the strategic and financial reporting aspects by members.
being driven by marketplace demands from both
consumers and investors, with CPAs staking their
ground in this emerging area.

17
Providing Members the
Tools to Succeed

The Institute places critical importance on

member development and advancement. With
resources and tools covering every dimension of
the CPA profession, the AICPA affords members
countless opportunities to improve their skills
and knowledge, regardless of their area of
specialization.
 Providing Members the Tools to Succeed

Accessing Technology for Members courses, live web events and virtual conferences.
They also will be able to easily track the status
• To provide members with up-to-the-minute of their CPE courses and access transcripts and
news and resources, the AICPA, in close certificates of completion on demand. Additional
collaboration with CPA2Biz, in May launched features include competency pathways to help
its new AICPA.org website. It features enhanced members gain the knowledge and skills to chart
navigation and search functions that offer a their careers. Development of a CPE compliance
more personalized experience and better meet tracker and firm administration customizations also
CPAs’ information needs. Built with leading-edge are under way.
technology, the site’s many enhancements include
RSS feeds; social media access and live updates;
member-only content; self-service membership Reaching Across Borders
profile management; enhanced search; AICPA
TV; and easy and comprehensive subscription • In a step that will promote cross-border
management of publications and emails. practice by streamlining the process through
which qualified accountants become certified
• Three new alliances offered AICPA members and licensed in each other’s countries, the U.S.
access to leading-edge cloud technology International Qualifications Appraisal Board, a joint
solutions. Confirmation.com is a paperless body of the AICPA and NASBA, signed a five-year
web-based solution designed to make audit Mutual Recognition Agreement with the New
confirmations more efficient and less risky. Zealand Institute of Chartered Accountants in 2009.
Copanion offers tax document technology There are similar existing agreements with Canada,
that allows firms to standardize tax preparation Mexico, Ireland and Australia.
workflows and improve productivity. XCM Solutions
is a pioneer in work-management and workflow • The AICPA/CICA Privacy Task Force, formed
technology for the accounting profession. These with the Canadian Institute of Chartered
newly added alliances join Apptix, Bill.com, Accountants, issued the Generally Accepted
Intacct and Paychex as part of CPA2Biz’s Trusted Privacy Principles to supersede the existing
Business AdvisorSM Solutions platform – AICPA and CICA Privacy Framework. Known as
web-based solutions transforming the way CPAs GAPP, the principles help organizations design and
conduct business and work with clients. Many implement sound privacy practices and policies.
educational webinars and white papers available
through the Trusted Business Advisor Program and • To provide members with news and insights
website helped CPA firms think more strategically on global issues, the new International page
about how best to package and position client on the revamped AICPA.org offers access to
services via cloud-based services, and how to best timely publications, the perspectives of the
implement these workflow improvement tools AICPA international community, educational
throughout their firms. opportunities and a quick link to IFRS.

• With the launch of the new AICPA Learning

Center, powered by CPA2Biz, members can get
instant online access to AICPA CPE self-study

19
 Given the importance of Roth IRA
conversion planning in 2010, the
AICPA Personal Financial Planning
section provided a wealth of resources
to help CPAs advise clients.
Serving Our Small-Firm Members Growing Resources for Financial Planners

• According to the 2009 PCPS CPA Firm Top Issues • Given the importance of Roth IRA conversion
Survey, client retention ranked as the top issue for planning in 2010, the AICPA Personal Financial
CPA firms of all sizes. In light of this challenge, the Planning (PFP) section provided a wealth of
Private Companies Practice Section (PCPS) this resources to help CPAs advise clients. PFP
year unveiled the PCPS Client Service Resource section members have access to the more
Center, a comprehensive source of tools and than-200-page The Rebirth of Roth: A CPA’s
information on issues including client retention, Ultimate Guide to Client Care, decision charts,
billing and collection, client advisory boards and a simple Roth conversion calculator, discounted
fee pressures, among other topics. sophisticated software, recordings and materials
from a comprehensive Roth web seminar series,
• PCPS also offered practitioners timely as well as access to articles and audio recordings
information and advice in the Economic Podcast to help guide their clients as they consider Roth
series. The presentations, which feature tips conversions.
from experienced CPAs, tackled topics such as
opportunities in a recession, financial metrics for •To encourage the competency of young
today’s CPA firm, cost-cutting and helping clients professionals in PFP, the AICPA sponsored a
address economic declines. new annual scholarship that allows a young CPA
to attend the AICPA Advanced Estate Planning
Conference. The Institute also created targeted
resources to encourage qualified new planners to
enter the profession.

20
• The PFP section added resources to help a new Personal Financial Specialist (PFS) exam
advance member knowledge and opportunities. review course that provides self-study CPE at a
A dedicated webpage reviews legislative and nominal cost. The Institute also established a
regulatory news in financial regulatory reform and PFP champion program to engage and equip
other key areas. Section members now have free passionate advocates for this discipline across the
access to Inside Information, a newsletter from country and added new participants to the PFS
respected author and consultant Bob Veres. Ten media spokesperson program, offering this group
new PFP Networking Groups launched this year hands-on media training.
allow members to share information and ideas. To
foster member competency, the AICPA developed

21
Securing the Future
through Leadership

The AICPA works to ensure the CPA profession

continues to grow and flourish, generating a
large pool of talented individuals to pursue
accounting careers. In addition, the Institute offers
members opportunities to help others move
forward, whether through improving their financial
knowledge or providing economic assistance.
 Securing the Future through Leadership

Looking Forward • The AICPA secured an extension of the Uniform

CPA Examination contract through 2024. It not
• As part of its commitment to protect the only allows the Institute to provide content for
public interest and maintain CPAs’ respected the exam, but also laid the groundwork for an
reputation, the AICPA stepped up its efforts improved exam. The AICPA developed methods
to promote licensure, creating tools and that will allow timely updates to the exam content
information for those taking the exam and that reflect changes in entry-level practice. This
working toward greater consistency in licensure process will allow the AICPA to keep the exam
regulation among the states. The Institute also up-to-date and relevant for generations of CPAs
is involved in helping the academic community to to come. The exam establishes a high standard
develop best practices in accounting education. for entry in the profession, protecting both the
profession and the public. As a key element of
• ThisWaytoCPA.com, a new website, explores professional development, the new This Way
the multiple career paths in the CPA profession to CPA website for college students and young
as well as provides guidance on becoming a professionals illustrates further the importance of
CPA. Some of the key features of the site include the exam in one’s career path.
mock job interviews and résumé tips, scholarship
information, state-by-state CPA licensure • The American Accounting Association and the
requirements and real CPA profiles. There also AICPA formed the Pathways Commission to
is a timeline that outlines the exam process and study possible future paths of higher education
a forum where questions can be posted and for those seeking entry into the accounting
answered by other users. profession. The commission is using a “supply
chain” approach; members of the supply chains
• “Start Here, Go Places.” has garnered more consist of individuals and representatives from
than 175,000 unique visitors since its relaunch organizations that have an impact on the various
in the summer of 2009. Many visitors come to the current accounting education pathways and will
award-winning site from partner organizations and assess and address the challenges educators and
state CPA societies. The “For Teachers” section practitioners face when teaching and training
of the website was featured at four national future accounting professionals over their lifetime.
educator conferences that reached more than
400 high school educators, guidance counselors •To ensure young CPAs will be prepared to be
and community college educators, providing more the profession’s next generation of leaders, a
information about careers in accounting. More CPA younger than the age of 36 was appointed
than 700 educators have registered on the website to every AICPA volunteer committee. In addition,
as a result. the second class of young CPAs was selected to
attend the AICPA’s Leadership Academy to learn
• A special section on the new AICPA.org the skills needed to lead their organizations,
describes the many career options open communities and the accounting profession.
to CPAs. It includes career assessment tools
that highlight the requirements for any number
of specializations.

23
 • The Accounting Doctoral Scholars (ADS) Financial Literacy website to offer the public
Program completed its third recruiting year personalized tools and information to better
on Oct. 1, 2010. Sixty applicants were selected manage their finances and make intelligent
to attend the ADS Orientation Conference in financial decisions. Among other enhancements,
Chicago. Of those attending the conference, 30 the site features a new “My 360” tool that
were selected as ADS Program Scholars and will allows registered users to create a customizable
be enrolling in Ph.D. programs beginning in the dashboard of articles and resources to help them
fall of 2011. They will join the 56 ADS Program make informed financial decisions and connect to
Scholars who have enrolled in Ph.D. programs local financial education events organized by their
since 2008. The ADS program helps bridge the gap state CPA societies. Since the April 2010 launch,
between practitioners and educators by recruiting the site has won two awards, boasts more than
future doctoral-level educators who have practical 10,000 registered users and averages 125,000
experience in auditing and tax. visits a month.

• The AICPA governing Council in May • The AICPA teamed with the Society for Human
unanimously authorized a proposed bylaw Resource Management to create the first national
amendment for a vote by the membership to award that recognizes employers that have
modernize the requirements to join the AICPA implemented financial education programs for
as a voting member. The change, overwhelmingly their staff. The award was created last spring on a
approved by members with more than 81% of the recommendation from the workplace subcommittee
vote, recognizes the diverse work environments of the President’s Advisory Council for Financial
of today’s accounting professionals, provides Literacy. Corporate, not-for-profit and government
consistency in AICPA admission requirements organizations are eligible to be selected for the
in light of disparate CPA certification/licensure Workplace Financial Education Award.
requirements among states and gives younger
professionals an earlier and closer association • The AICPA donated $40,000 to Habitat for
with CPAs. Humanity International on behalf of the CPA
profession to assist in the ongoing recovery
effort in Haiti. The donation was made possible by
Improving People’s Lives AICPA member contributions to its disaster relief
program: CPAs in Support of America Fund Inc.
• Demonstrating its continuing commitment to The Institute’s funding was used to help 10 families
improving the financial literacy of all Americans, repair and reconstruct their homes.
the AICPA launched a new 360 Degrees of

24
The AICPA teamed with the Society
for Human Resource Management
to create the first national award
that recognizes employers that have
implemented financial education
programs for their staff.

25
Board of Directors 2009-2010
Officers For Two Years (2009-2011)
Robert R. Harris, CPA, Chairman Terry E. Branstad*
Paul V. Stahlin, CPA, Vice Chairman Richard J. Caturano, CPA
Ernest A. Almonte, CPA, Immediate Past Patricia Cochran, CPA
Chairman F. Carter Heim, CPA
Barry C. Melancon, CPA, President and Henry R. Keizer, CPA
CEO Karen V. Pincus, CPA

Directors For One Year (2009-2010)

For Three Years (2009-2012) Wynne E. Baker, CPA
Allyson B. Baumeister, CPA Timothy L. Christen, CPA
Rodney M. Harano, CPA Bob Graham*
Mark L. Hildebrand, CPA Paula C. Hanson, CPA
Jeffrey R. Hoops, CPA Kenneth M. Hughes, CPA
William A. McKenna Jr.* Robert J. Laux, CPA
William D. Schneider Sr., CPA Jimmy J. Williams, CPA

* Public Members
finAnCiALS
2009-2010 AnnuAl RepoRt
Sources and Occupations of AICPA Membership

AICPA Voting Membership Since 2001

322,000 324,000 326,000 328,000 330,000 332,000 334,000 336,000 338,000 340,000 342,000 344,000 346,000 348,000

2010 348,051

2009 342,562

2008 338,687

2007 334,372

2006 330,525

2005 327,135

2004 334,635

2003 335,111

2002 337,867

2001 336,081

2010 Total AICPA Voting Membership 348,051 Members Membership in Public Practice 154,941 Members

Public Accounting 42% Firms with one member 18%

Business and Industry 42% Firms with 2-9 members 26%
Government 3% Firms with 10 or more members 22%
Education 2% 25 largest firms 34%
Retired & Misc. 11%

09-10 AnnuAL RepoRt 29

 Management’s Discussion and Analysis
Membership in the AiCpA is a unique and personal experience easily online; RSS feeds; social media accounts with live updates;
for each of our 369,000 members. the AiCpA works every day to and AiCpA tV, among others. in addition, the AiCpA’s 360 Degrees
provide members with the resources, information and leadership of financial Literacy and “Start Here, Go places.” websites were
that enable them to provide valuable services in the highest redesigned to provide enhanced features and improved interactivity.
professional manner to benefit the public as well as employers A new website, this Way to CpA, was launched in September 2010
and clients. in fulfilling this mission, the AiCpA focused this year on to help accounting students, graduates and young professionals
developing numerous resources to support its diverse membership. stay focused on continuing their career development and highlight
the importance of taking the CpA examination (the exam).
the AiCpA continued to be vigilant in protecting its members
and the public interest from unnecessary or unintended A detailed account of our broad range of activities is provided in
regulatory burdens. for example, the AiCpA, with support from this Annual Report, and it is important to place this Management’s
state CpA societies, firms and federal key person contacts, Discussion and Analysis in the context of the achievements and
defeated an effort to create a private right of action for “aiding challenges experienced during fiscal 2010. our total operating
and abetting” that could have extended civil liability to secondary revenue exceeded $200 million for the third consecutive year. in
parties, such as accountants, in securities lawsuits. We also won addition, our regular voting and total membership reached
special recognition for CpAs under the newly created Consumer record breaking numbers, for the second year in a row, exceeding
financial protection Bureau for their “customary and usual” 348,000 and 369,000 members, respectively, in 2009 and 2010.
services. furthermore, we continue to work closely with the iRS
on its tax preparer registration program and we helped preserve
private sector, independent standard setting for the financial REPORT ON OPERATIONS
Accounting Standards Board (fASB) by stopping a legislative
amendment that would have jeopardized it. Investments
in fiscal 2010, the AiCpA’s investments portfolio grew by
the AiCpA continues to take an active role in shaping the standards
approximately $12 million from the prior year as a result of
governing the profession’s work. Most notably, the AiCpA took the
improved market conditions and the reinvestment of dividends
lead in creating and serving on a landmark blue ribbon panel to
and interest earned. the portfolio is well diversified across
explore and make recommendations regarding the future of
equity and fixed income securities and the AiCpA remains
standard setting for private companies. We also submitted
diligent in actively monitoring the performance and allocation
comment letters on key proposed accounting and auditing
of its investments, in partnership with its investments committee.
standards, such as those released for public comment by the
fASB and the international Accounting Standards Board under the Computerized CPA Examination
accounting standards convergence project. fiscal 2010 activities
the exam is delivered through a tri-party agreement (Agreement)
also included supporting the Securities and exchange Commission’s
between the national Association of State Boards of Accountancy,
Work plan on public companies’ possible transition to international
prometric and the AiCpA. the AiCpA accounts for the exam on
financial Reporting Standards, and advocating for worldwide
a break-even basis over the life of the Agreement, which was
reporting standards for climate change-related disclosures as
extended to 2024 during fiscal 2010.
part of an entity’s sustainability activities. Additionally, the AiCpA
is continually creating new resources that will help prepare members fiscal 2010 also marked the fourth straight year where the exam’s
for proposed changes in professional standards. revenue exceeded costs incurred. Accordingly, costs equal to the
revenue recognized in the current year have been expensed, with
Making it easy for you to have quick access to our news, information
the excess of revenue over expenses of $14.9 million recognized as
and tools is essential to helping you benefit from your membership
a reduction of deferred costs. As such, at July 31, 2010, the balance
and from all that the AiCpA does on your behalf. During fiscal 2010,
of approximately $18.3 million of net deferred costs is reflected
we introduced the new AiCpA.org website, transforming how we
in the Combined Statement of financial position. Since the exam
communicate with our members. the site includes an array of new
launched in 2004, the deferred asset balance is approximately
features designed to help our members get the right information
$21 million lower than management’s projections presented to
at the right time, such as the selection of AiCpA publications and
Council in the fall of 2005 due to higher candidate volume and
emails; a My Account functionality to manage your membership
lower expenses.

30 A i C pA : f i n A n C i A L S
 9% Operating Revenue by Activity

Membership Dues 50%

11%
Professional Development
& Member Service
Conferences 19%

50% Professional Examinations 11%

11%
Publications 11%

Investment &
Other Income 9%

19%

Total Expenses by Activity

Professional Development &
4% Member Service Conferences 15%
4%
15% Professional Examinations 13%
5%
Publications 12%

7% Regulation & Legislation 11%

General Management 11%

13%
Technology 10%
8%
Other 8%

Technical 7%
10% 12% Organization & Membership
Development 5%

11% 11% Communications & Public Relations 4%

Other Financial Charges 4%

09-10 AnnuAL RepoRt 31

 Management’s Discussion and Analysis
three main factors affect the recoverability of deferred costs the AiCpA, with the approval of the Board of Directors (Board),
associated with the exam and are tested annually for impairment – modified the target asset allocations to be 50% fixed income
(1) future candidate volume; (2) future price increases; and (3) cost investments and 50% equity and other investments. the study also
management. Given these factors and the financial performance concluded that the AiCpA should adopt a dynamic asset allocation
in fiscal 2010, the projections continue to reflect the AiCpA’s strategy for the plan, which is intended to reduce volatility with the
belief that the deferred costs associated with the exam will be plan’s funded status as the funded status improves over time. As the
fully recovered over the life of the Agreement. plan’s funded strategy improves, the AiCpA will increase the target
allocation of the plan’s assets in fixed income investments and
the candidate cost to take the exam is set by each licensing
decrease the overall target allocation of the plan’s assets in equity
jurisdiction and currently ranges between $848 and $1,142,
and other investments. this strategy was adopted by the Board in
assuming a candidate takes all four parts. the AiCpA currently
August 2010.
earns $95 per section or $380 for a candidate taking all four parts
of the exam regardless of the candidate charge set by the licensing the AiCpA did implement a plan freeze effective April 30, 2017,
jurisdiction. Although price increases are permitted under the terms which means that no further benefit accruals will occur after this
of the Agreement, there were no price increases in fiscal 2010, and date. furthermore, all AiCpA employees hired after november 2005
none are planned for fiscal 2011. receive a lower pension benefit but a higher employer match under
our defined contribution plan. it is important to note that more than
Long-term Debt 70% of the pension liability is attributable to former employees that
At July 31, 2009, the AiCpA had total long-term debt of have already vested in the plan. Management reviews the design
$44.9 million, comprised of a $2.9 million interest-free line of of its defined benefit pension and other postretirement plans on a
credit from prometric to finance the computerization of the regular basis to assess opportunities to manage the exposure that
exam and a $42 million term loan. market fluctuations may create to our financial situation.

During fiscal 2010, the AiCpA made principal payments of

$1.4 million under the interest-free line of credit and $5.3 million
in principal payments under the term loan. At July 31, 2010, total
CPA2Biz
long-term debt was $38.2 million.
in fiscal 2010, CpA2Biz’s revenue totaled $19.4 million with net
Management will evaluate opportunities to retire this existing debt income of $0.8 million. the CpA2Biz e-commerce site again
sooner than the current maturity dates, as cash flow permits. received high marks for member satisfaction and was ranked
by internet Retailer as a top 500 Retail Web Site for the fifth
Defined Benefit Plans
consecutive year. During the year, CpA2Biz invested significant
in fiscal 2010, the AiCpA experienced an increase in the value resources in a new Learning Management System for members, as
of the assets of the pension plan (plan) but was negatively impacted well as added three key strategic alliances — Confirmation.com,
by a lower discount rate, as the interest rate environment continued Copanion and XCM — to its suite of best-in-breed cloud computing
to be volatile. this volatility resulted in pension and postretirement solutions. these new solutions join Bill.com, intacct and paychex
charges in excess of net periodic cost of $7.4 million, which has as part of CpA2Biz’s trusted Business Advisor Solutions platform,
been included in other Charges in the Statement of Activities. transforming how CpAs conduct business and deliver services
As the value of the plan’s assets recovers in the future, and interest to clients.
rates rise, it is expected that this financial impact will reverse itself
over time. in early fiscal 2011, CpA2Biz’s nY office lease expired and CpA2Biz
relocated its staff into the AiCpA’s new York office. this relocation
in addition, during fiscal 2010, the AiCpA’s investments committee will allow for greater synergies and efficiencies between the
commissioned a study of the plan’s assets and obligations. AiCpA and CpA2Biz while also reducing occupancy costs on a
the study concluded that to better match the duration of the combined basis.
plan’s assets and obligations, the plan’s asset allocation to fixed
income investments should increase and the plan’s asset
allocation to equity investments should decrease. in May 2010,

32 A i C pA : f i n A n C i A L S
Management’s Discussion and Analysis
FINANCIAL RESULTS • Operating expenses on a combined basis were $198.1 million in
fiscal 2010 compared to $191.6 million in fiscal 2009. the increase
these combined financial statements include the accounts of the is primarily due to higher professional examinations expenses
AiCpA, its subsidiaries CpA2Biz, inc. and northStar Conferences, due to higher exam volume and higher technology expenses
LLC (northStar), and the Related organizations (AiCpA foundation, as a result of the launch of the new AiCpA.org, 360 Degrees of
AiCpA Benevolent fund, inc. and Accounting Research Association, financial Literacy and “Start Here, Go places.” sites in fiscal 2010
inc.). the AiCpA and northStar are not responsible for any and development of the new website this Way to CpA, which
liabilities or other obligations of CpA2Biz or the Related launched in early fiscal 2011. the increase was offset by lower
organizations included in the combined financial statements. expenses related to professional development activities, primarily
Below are highlights from our combined financial statements as as a result of the decrease in related revenue.
of and for the year ended July 31, 2010: • Cash provided by operating activities was $9.5 million in fiscal
• Total assets on a combined basis were $225.7 million in fiscal 2010 compared to $38.1 million in fiscal 2009. this change is
2010 compared to $232.1 million in fiscal 2009. the decrease is primarily the result of the lower advance dues in fiscal 2010.
primarily due to lower exam deferred costs and lower collection of Cash used in investing activities was $9.4 million in fiscal 2010
dues in advance of fiscal 2011, which was attributable to mailing compared to $10.9 million in fiscal 2009. this change is primarily
the dues bills one month later than the prior year. the dues bill due to lower purchases of amortizable assets in fiscal 2010.
mailing correlates to Council’s Spring meeting to approve the Cash used in financing activities was $6.7 million in fiscal 2010
dues rates, which occurred in May 2010 as compared to April 2009. compared to $8.4 million in fiscal 2009. the net cash outflow
these decreases are partially offset by higher investment values in fiscal 2010 was solely attributable to the repayment of
due to economic recovery in the market and higher exam-related long-term debt.
accounts receivable resulting from an increase in candidate
volume and revenue.
CONCLUSION
• Total liabilities on a combined basis were $177.3 million in fiscal
2010 compared to $201.9 million in fiscal 2009. the decrease is the AiCpA will continue to serve as an advocate for our members
largely attributable to the decrease in advance dues mentioned and the profession, and we will continue to strive to provide you
above and lower long-term debt associated with the principal with the right resources, information and leadership at the right
payments made in fiscal 2010. this decrease is offset by higher time to enable you to serve your clients, employers, and the public.
net pension and postretirement expenses and an accrual for the We successfully navigated a challenging year during this time
AiCpA’s 401(k) match, which became discretionary effective of economic recovery, and we are proud of our many key
August 1, 2009 and was based on achieving certain financial accomplishments outlined above and throughout this Annual
performance indicators, as monitored by the finance Committee. Report. We are also pleased that we generated a modest
• Operating revenue on a combined basis was $214.8 million operating profit in fiscal 2010, especially given market volatility.
in fiscal 2010 compared to $216.0 million in fiscal 2009. the We will continue to invest in programs that maintain the CpA’s
revenue decrease is primarily attributable to lower contribution place as trusted advisors.
revenue related to the AiCpA foundation’s Accounting Doctoral Management believes that the AiCpA has sufficient liquidity and
Scholarship program, as over sixty signed commitments (ranging working capital to meet its needs in the upcoming fiscal year, and it
from five to seven years) were received in 2009 during the initial continues to monitor current economic conditions and their impact
launch of the program versus six signed commitments of a similar to the fiscal 2011 operating results.
duration in 2010, lower advertising revenue and lower print
publication revenue due to a decline in print publication orders
from large firms. the decrease was offset primarily by higher
AiCpA membership dues revenue associated with achieving
a record number of members and higher exams revenue as
noted earlier.

09-10 AnnuAL RepoRt 33

 Management’s Responsibilities for Financial
Statements and Internal Control
Financial Statements Internal Control
the financial statements of the American institute of Certified the institute maintains internal control over financial reporting and
public Accountants and Related organizations (the “institute”) were over safeguarding of assets against unauthorized acquisition, use
prepared by management, which is responsible for their reliability or disposition which is designed to provide reasonable assurance
and objectivity. the statements have been prepared in conformity to the institute’s management and Board of Directors regarding the
with accounting principles generally accepted in the united States preparation of reliable financial statements and the safeguarding
of America and, as such, include amounts based on informed of assets. internal control includes a documented organizational
estimates and judgments of management. financial information structure, a division of responsibility, and established policies and
elsewhere in this Annual Report is consistent with that in the procedures, including a code of conduct, to foster a strong ethical
financial statements. climate.

the Board of Directors, operating through its Audit Committee, established policies are communicated throughout the institute and
which is composed entirely of directors who are not officers or enhanced through the careful selection, training and development
employees of the institute, provides oversight of the financial of its staff. internal auditors monitor the operation of internal control
reporting process and safeguarding of assets against unauthorized and report findings and recommendations to management and
acquisition, use or disposition. the Audit Committee annually the Board of Directors. Corrective actions are taken, as required, to
recommends the appointment of independent public accountants address control deficiencies and implement improvements.
and submits its recommendation to the Board of Directors, and then
there are inherent limitations in the effectiveness of any system of
to the governing Council, for approval.
internal control, including the possibility of human error and the
the Audit Committee meets with management, the independent circumvention or overriding of controls. Accordingly, even the most
public accountants and the internal auditor; approves the overall effective internal control can provide only reasonable assurance with
scope of audit work and related fee arrangements; and reviews respect to financial statement preparation and the safeguarding of
audit reports and findings. in addition, the independent public assets. furthermore, the effectiveness of internal control can change
accountants and the internal auditor meet separately with the with circumstances.
Audit Committee, without management representatives present,
the institute has assessed its internal control over financial reporting
to discuss the results of their audits, the adequacy of the institute’s
in relation to criteria described in Internal Control – Integrated
internal control, the quality of its financial reporting, and the
Framework, issued by the Committee of Sponsoring organizations
safeguarding of assets against unauthorized acquisition, use or
of the treadway Commission. Based on this assessment, the
disposition.
institute believes that, as of July 31, 2010, its internal control
the financial statements have been audited by an independent over financial reporting and over safeguarding of assets against
public accounting firm, J.H. Cohn LLp, which was given unrestricted unauthorized acquisition, use or disposition met those criteria.
access to all financial records and related data, including minutes
J.H. Cohn LLp was also engaged to report separately on the
of all meetings of the governing Council, the Board of Directors
institute’s assessment of its internal control over financial reporting
and committees of the Board. the institute believes that all
and over safeguarding of assets against unauthorized acquisition,
representations made to the independent public accountants
use or disposition.
during their audits were valid and appropriate.
the report of the independent public accountants follows this
the report of the independent public accountants follows this
statement.
statement.

Barry C. Melancon, CpA Anthony J. pugliese, CpA, Citp

president and Ceo Senior Vice president
finance, Membership and operations
34 A i C pA : f i n A n C i A L S
Reports of Independent Public Accountants
To the Members of the To the Members of the
American Institute of Certified Public Accountants American Institute of Certified Public Accountants
We have examined management’s assertion, included in the We have audited the accompanying combined statements of
accompanying statement of management’s responsibilities for financial position of the American institute of Certified public
financial statements and internal control, that the American Accountants and Related organizations as of July 31, 2010 and
institute of Certified public Accountants and Related organizations 2009, and the related combined statements of activities, preferred
maintained effective internal control over financial reporting and stock and net assets and cash flows for the years then ended.
over safeguarding of assets against unauthorized acquisition, these financial statements are the responsibility of the institute’s
use or disposition as of July 31, 2010, based on criteria management. our responsibility is to express an opinion on these
established in “internal Control – integrated framework” issued financial statements based on our audits.
by the Committee of Sponsoring organizations of the treadway
We conducted our audits in accordance with auditing standards
Commission. Management is responsible for maintaining effective
generally accepted in the united States of America. those
internal control over financial reporting and over safeguarding
standards require that we plan and perform the audit to obtain
of assets, and against unauthorized acquisition, use or disposition.
reasonable assurance about whether the financial statements are
our responsibility is to express an opinion on management’s
free of material misstatement. An audit includes examining, on
assertion based on our examination.
a test basis, evidence supporting the amounts and disclosures
our examination was conducted in accordance with attestation in the financial statements. An audit also includes assessing the
standards established by the American institute of Certified public accounting principles used and significant estimates made by
Accountants and, accordingly, included obtaining an understanding management, as well as evaluating the overall financial statement
of the internal control over financial reporting and over safeguarding presentation. We believe that our audits provide a reasonable basis
of assets against unauthorized acquisition, use or disposition; for our opinion.
testing and evaluating the design and operating effectiveness of
in our opinion, the combined financial statements referred to above
the internal control; and performing such other procedures as we
present fairly, in all material respects, the financial position of the
considered necessary in the circumstances. We believe that our
American institute of Certified public Accountants and Related
examination provides a reasonable basis for our opinion.
organizations as of July 31, 2010 and 2009, and the changes in their
Because of inherent limitations in any internal control, net assets and cash flows for the years then ended, in conformity
misstatements due to error or fraud may occur and not be with accounting principles generally accepted in the united States
detected. Also, projections of any evaluation of the internal of America.
control over financial reporting and over safeguarding of assets
against unauthorized acquisition, use or disposition to future
periods are subject to the risk that the internal control may become
inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate. J.H. Cohn LLp
Roseland, new Jersey
in our opinion, management’s assertion that the American institute September 24, 2010
of Certified public Accountants and Related organizations
maintained effective internal control over financial reporting and
over safeguarding of assets against unauthorized acquisition, use
or disposition as of July 31, 2010, is fairly stated, in all material
respects, based on criteria established in “internal Control –
integrated framework” issued by the Committee of Sponsoring
organizations of the treadway Commission.

J.H. Cohn LLp

Roseland, new Jersey
September 24, 2010

09-10 AnnuAL RepoRt 35

 Financial Statements
July 31, 2010 and 2009
AMeRiCAn inStitute of CeRtifieD puBLiC CoMBineD StAteMentS of finAnCiAL poSition
ACCountAntS AnD ReLAteD oRGAniZAtionS JuLY 31,

2010 2009
($000)
ASSetS:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 35,548 $ 42,106
Certificates of deposit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,689 501
investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102,025 89,868
Accounts and notes receivable, net of allowance for doubtful accounts . . . . . . . . . . . 14,672 14,400
Contributions receivable, net of discount
and provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,208 6,365
Deferred costs and prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,544 48,048
Goodwill and other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,553 12,553
furniture, technology and leasehold improvements, net . . . . . . . . . . . . . . . . . . . . . . . . 17,424 18,209
totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 225,663 $ 232,050

LiABiLitieS:
Accounts payable and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 28,504 $ 23,327
Accrued relocation expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,257 7,562
Advance dues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,844 65,324
unearned revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,737 10,276
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,179 44,857
Deferred rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,340 13,643
Deferred employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,451 36,933

total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177,312 201,922

pRefeRReD StoCK AnD net ASSetS:

preferred stock of C2B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,201 58,657

net assets:
unrestricted:
AiCpA and related organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,024 15,050
C2B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (41,264) (52,737)
total unrestricted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,240) (37,687)
temporarily restricted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,742 8,510
permanently restricted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 648 648
total net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150 (28,529)

total preferred stock and net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,351 30,128

totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 225,663 $ 232,050

the accompanying notes to financial statements are an integral part of these statements.

36 A i C pA : f i n A n C i A L S
AMeRiCAn inStitute of CeRtifieD puBLiC CoMBineD StAteMentS of ACtiVitieS
ACCountAntS AnD ReLAteD oRGAniZAtionS YeARS enDeD JuLY 31,

2010 2009
($000)
CHAnGeS in net ASSetS:
operating revenue:
Dues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 107,821 $ 103,879
publications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,003 26,376
professional development and member service conferences . . . . . . . . . . . . . . . . . . 39,570 39,951
professional examinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,544 21,618
investment and sundry income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,440 15,631
Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,452 8,530
total operating revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214,830 215,985

operating expenses:
program services:
publications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,357 24,167
professional development and member service conferences . . . . . . . . . . . . . . . 31,972 33,960
Member services:
Regulation and legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,492 23,138
technical . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,407 14,873
publications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 482 611
other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,721 10,508
professional examinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,843 22,277
Communications and public relations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,410 9,117
Support and scholarships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,727 4,710
Assistance programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 565 529
Supporting activities:
General management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,033 15,811
organization and membership development . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,014 11,590
technology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,879 18,742
Relocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,148 1,535
total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198,050 191,568

excess of operating revenue over expenses before other charges . . . . . . . . . . . . . . . . 16,780 24,417
other charges:
pension and postretirement charges in excess of net periodic cost . . . . . . . . . . . . . (7,378) (27,730)
interest expense incurred on derivative financial instruments . . . . . . . . . . . . . . . . . . (546) (805)
totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,924) (28,535)

excess (deficiency) of operating revenue over expenses . . . . . . . . . . . . . . . . . . . . . . . . 8,856 (4,118)

Gains (losses) on investments:

Realized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (385) (2,898)
unrealized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,975 (9,923)
totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,590 (12,821)

Change in net assets before minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,446 (16,939)

Minority interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223 –

Change in net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,223 (16,939)

net assets, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (28,529) (36,590)

Conversion of preferred stock into common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,456 25,000

net assets, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 150 $ (28,529)

the accompanying notes to financial statements are an integral part of these statements.

09-10 AnnuAL RepoRt 37

 AMeRiCAn inStitute of CeRtifieD puBLiC CoMBineD StAteMentS of pRefeRReD StoCK AnD net ASSetS
ACCountAntS AnD ReLAteD oRGAniZAtionS JuLY 31,

($000)
AiCpA and
Related
organizations C2B totAL

2010:
preferred stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 48,201 $ 48,201

net assets:
unrestricted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 31,024 (41,264) (10,240)
temporarily restricted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,742 9,742
permanently restricted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 648 648
total net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,414 (41,264) 150

totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 41,414 $ 6,937 $ 48,351

2009:
preferred stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 58,657 $ 58,657

net assets:
unrestricted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,050 (52,737) (37,687)
temporarily restricted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,510 8,510
permanently restricted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 648 648
total net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,208 (52,737) (28,529)

totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24,208 $ 5,920 $ 30,128

the accompanying notes to financial statements are an integral part of these statements.

38 A i C pA : f i n A n C i A L S
AMeRiCAn inStitute of CeRtifieD puBLiC CoMBineD StAteMentS of CASH fLoWS
ACCountAntS AnD ReLAteD oRGAniZAtionS YeARS enDeD JuLY 31,

2010 2009
($000)
increase (decrease) in cash:
operating activities:
Cash received from members and customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 185,281 $ 221,962
interest and dividends received. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,415 2,617
Cash paid to suppliers, employees and others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (174,235) (182,562)
interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,367) (2,677)
income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,593) (1,280)

net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,501 38,060

investing activities:
payments for purchase of amortizable assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,028) (4,701)
payments for purchase of furniture and technology . . . . . . . . . . . . . . . . . . . . . . . . . . (3,598) (2,689)
payments for purchase of certificates of deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,804) (1,251)
payments for purchase of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15,493) (18,576)
proceeds from sale of certificates of deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,616 750
proceeds from sale of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,926 15,588

net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,381) (10,879)

financing activities – repayment of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,678) (8,357)

net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,558) 18,824

Cash and cash equivalents, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,106 23,282

Cash and cash equivalents, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 35,548 $ 42,106

09-10 AnnuAL RepoRt 39

 AMeRiCAn inStitute of CeRtifieD puBLiC CoMBineD StAteMentS of CASH fLoWS
ACCountAntS AnD ReLAteD oRGAniZAtionS YeARS enDeD JuLY 31,

2010 2009
($000)
Reconciliation of change in net assets to net cash provided by operating activities:
Change in net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,223 $ (16,939)
Adjustments to reconcile change in net assets to net cash
provided by operating activities:
Depreciation and amortization:
furniture, technology and leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . 4,004 4,167
internal software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,214 1,930
Loss on disposal of furniture, technology, leasehold
improvements and software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 379 3
Loss on sale of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 385 2,898
Amortization of unearned revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (461) (517)
unrealized (gain) loss on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,975) 9,923
Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223
provision for:
Losses on accounts and notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (656) (131)
Losses on contributions receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Discount on contributions receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (86) 493
Accrued relocation expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,148 1,535
Deferred rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 697 (243)
Deferred employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,913 28,843
Changes in operating assets and liabilities:
Accounts and notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,572) (1,293)
Contributions receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (807) (6,393)
Deferred costs and prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,535 7,397
Accounts payable and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,737 (4,188)
Accrued relocation expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,453) (3,171)
Advance dues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (23,524) 17,954
unearned revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (78) (966)
Deferred employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,395) (3,242)
total adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,722) 54,999

net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,501 $ 38,060

Supplemental disclosures of noncash operating and investing activities:

furniture, technology, leasehold improvements and internal software . . . . . . . . . . . $ 1,217 $ 1,271

the accompanying notes to financial statements are an integral part of these statements.

40 A i C pA : f i n A n C i A L S
Notes to Combined Financial Statements
NOTE 1. ORGANIZATION: NOTE 2. SUMMARy OF SIGNIFICANT ACCOUNTING POLICIES:

the financial statements include the accounts of the American Basis of presentation:
institute of Certified public Accountants (AiCpA), its for-profit the preparation of financial statements in conformity with
subsidiaries, CpA2Biz, inc. (C2B) and northStar Conferences LLC accounting principles generally accepted in the united States of
(northStar) (collectively AiCpA and Subsidiaries), and the following America requires management to make estimates and assumptions
related organizations: the Accounting Research Association, inc. that affect certain reported amounts and disclosures. Accordingly,
(ARA); the AiCpA Benevolent fund, inc. (Benevolent fund); and actual results could differ from those estimates.
the American institute of Certified public Accountants foundation
(foundation), which have been combined in accordance with All significant intercompany accounts and transactions have been
accounting standards for not-for-profit organizations. the AiCpA, eliminated in combination.
the ARA and the foundation are incorporated in the District of
financial statement presentation follows the accounting standards
Columbia, C2B and northStar are incorporated in Delaware and
for not-for-profit organizations. under these standards, an
the Benevolent fund is incorporated in new York. As used herein,
organization is required to report information regarding its financial
the “institute” includes the AiCpA and Subsidiaries and the related
position and activities according to three classes of net assets
organizations.
depending on the existence and/or nature of any donor restrictions
the AiCpA is the national professional organization for Certified as follows: unrestricted net assets, temporarily restricted net assets
public Accountants. it provides members with the resources, and permanently restricted net assets.
information and leadership that enable them to provide services
the foundation is a not-for-profit organization that is subject
in the highest professional manner. C2B is the exclusive online
to an enacted version of the uniform prudent Management of
and offline marketing agent for certain products and services of
institutional funds Act of 2006 (upMifA). Disclosures about an
the AiCpA and for maintaining the official website for the sale of
organization’s endowment funds (both donor restricted endowment
AiCpA products (see note 10). northStar provides professional
funds and board designated endowment funds) are required
development programs and conferences for various industries. the
whether or not the organization is subject to upMifA. As stated in
mission of the ARA is to provide funds for studies and research in
note 1, the foundation is incorporated in the District of Columbia.
regard to principles and standards of the accounting profession
the District of Columbia adopted upMifA effective in 2008.
(see note 12). the Benevolent fund provides temporary financial
assistance to members of the AiCpA and their families. the the foundation’s Board of trustees has determined that the
foundation advances the science of accountancy and accounting majority of the foundation’s net assets do not meet the definition
education by funding a number of activities, including the of endowment under upMifA. the foundation is governed
promotion of diversity within the accounting profession. During subject to its Constitution and Bylaws. Certain contributions are
2008, the foundation initiated the Accounting Doctoral Scholarship received subject to other gift instruments or are subject to specific
program (ADS) to focus on the shortage of academically qualified agreements with the foundation.
university accounting faculty (see note 11).
under the terms of the Constitution and Bylaws, the Board of
the AiCpA and State Societies network, inc., composed of trustees has the ability to distribute so much of the corpus of
substantially all of the individual state societies of CpAs located any trust or separate gift, devise, bequest or fund as the Board
throughout the united States, are equal percentage members of of trustees in its sole discretion shall determine. As a result of
Shared Services, LLC (SSLLC), a Delaware limited liability company, the ability to distribute corpus, all contributions not classified as
organized for the purpose of managing shared services between temporarily restricted or permanently restricted are classified as
the AiCpA and participating state societies. the AiCpA accounts unrestricted net assets for financial statement purposes and are not
for its 50% investment in SSLLC on the equity method although the subject to donor-imposed stipulations.
investment remains at zero as of July 31, 2010. SSLLC maintains a
temporarily restricted net assets consist of restricted contributions
limited amount of activity, principally group buying power on certain
receivable and the remaining portion of donor-restricted
products and services for the benefit of the AiCpA and participating
endowment funds that are not classified as permanently restricted
state societies. SSLLC’s Board of Directors continues to explore
net assets. When donor restrictions expire, that is, when a stipulated
additional opportunities to fulfill its mission.

09-10 AnnuAL RepoRt 41

 time restriction ends or a purpose restriction is fulfilled, temporarily stated at the lower of cost or market. A moving average method
restricted net assets are reclassified to unrestricted net assets and is used for determining inventory cost. inventories are reflected
reported in the statement of activities as net assets released from as a component of deferred costs and prepaid expenses in the
restrictions. accompanying statements of financial position.

permanently restricted net assets are subject to donor-imposed Goodwill represents the excess of the purchase price over the fair
stipulations that they be maintained permanently by the value of net assets acquired in business acquisitions accounted
foundation. Such permanently restricted net assets represent the for under the purchase accounting method, attributable to
fair value of the original gift as of the gift date and the original value acquisitions made by C2B. other intangibles include identifiable
of subsequent gifts to donor-restricted endowment funds. intangible assets purchased by C2B, primarily in connection
with business acquisitions. intangibles with a definite life are
the costs of providing various programs and activities have been
presented net of related accumulated amortization and impairment
summarized on a functional basis in the statement of activities.
charges, if incurred, and are being amortized over five years.
Accordingly, certain costs have been allocated among the programs
Goodwill and indefinite-lived intangibles are accounted for under
and supporting services benefited.
a nonamortization approach and are evaluated annually for
Certain accounts in the 2009 financial statements have been impairment (see note 6).
reclassified to conform with the current year’s presentation.
the institute records impairment losses on goodwill and other
Valuation of assets and liabilities: intangible assets when events and circumstances indicate that such
assets might be impaired and the estimated fair value of the asset
the institute considers investments with an original maturity of
is less than its recorded amount. Conditions that would necessitate
ninety days or less when purchased to be cash equivalents. As of
an impairment assessment include material adverse changes
July 31, 2010 and 2009, the institute’s cash equivalents consisted
in operations; significant adverse differences in actual results in
primarily of short-term u.S. treasury obligations and money
comparison with initial valuation forecasts prepared at the time
market funds.
of acquisition; a decision to abandon acquired products, services
Certificates of deposit have maturity dates greater than ninety days or technologies; or other significant adverse changes that would
and less than one year. indicate the carrying amount of the recorded asset might not be
recoverable.
investments in equity securities with readily determinable fair values
and all investments in debt securities and investment partnerships furniture, technology and leasehold improvements are stated at
are reported at fair value with unrealized gains and losses included cost, less accumulated depreciation or amortization computed on
in the statement of activities. the investment partnership represents the straight-line method. furniture and technology are depreciated
ownership in a private investment partnership that trades foreign over their estimated useful lives of three to ten years. Leasehold
equity securities under the direction of asset managers. improvements are amortized over the shorter of their useful lives or
the remainder of the lease period.
the carrying amounts of cash and cash equivalents, certificates
of deposit, receivables, accounts payable and accrued expenses Concentrations of credit risk:
approximate fair value because of the short-term nature of the financial instruments, which potentially subject the institute to
items. the fair value of equity securities and fixed income securities concentrations of credit risk, include cash and cash equivalents;
is determined by quoted market prices. the fair value of investment certificates of deposit; investments; trade receivables; notes and
partnership is determined by the asset manager based on the mortgages receivable; contributions receivable; and derivative
market values of the underlying equity securities. the fair value of financial instruments used in hedging activities. At times, the
long-term debt is based on current interest rates for similar debt institute’s cash exceeds the current insured amount under the
instruments. the fair value of derivative instruments is based on federal Deposit insurance Corporation (fDiC). As of July 31, 2010
current settlement value. and 2009, the institute’s cash balance exceeded the current insured
inventories consist of paper and material stock, publications in amount under fDiC by approximately $5,450,000 and $5,111,000.
process and printed publications and course material and are the institute places its cash equivalents in Sweep investment

42 A i C pA : f i n A n C i A L S
Accounts (Sweep Accounts) collateralized by u.S. treasury Derivative financial instruments:
obligations and are not insured nor guaranteed by the fDiC. the institute utilizes derivative financial instruments to reduce
As of July 31, 2010 and 2009, the balance in the Sweep Accounts interest rate risk. the institute does not hold or issue derivative
were $25,859,000 and $0. the institute holds bonds and notes financial instruments for trading purposes. the institute recognizes
issued by the u.S. Government and financially strong corporations. all derivatives as either assets or liabilities in the statement of
By policy, these investments are kept within limits designed to financial position and measures those instruments at fair value.
prevent risks caused by concentration. Changes in the fair value of those instruments are reported in the
As of July 31, 2010 and 2009, cash and cash equivalents statement of activities.
temporarily restricted as to use for the ADS program (see note 11)
Revenue recognition:
was $1,064,000 and $1,123,000. As of July 31, 2010 and 2009,
Revenue from dues is recorded in the applicable membership
certificates of deposit temporarily restricted as to use for the
period.
ADS program were $1,002,000 and $0.
Revenue from publications, professional development and member
Restricted cash is limited in use for legislative consulting services.
service conferences and professional examinations is recognized
At July 31, 2010, restricted cash, which is included in cash and cash
when goods are shipped to customers or services are rendered.
equivalents on the statement of financial position, totaled $219,051.
Revenue from subscriptions is deferred and recognized on the
Credit risk with respect to trade receivables is also limited because
straight-line method over the term of the subscriptions, which is
the institute deals with a large number of customers in a wide
primarily for one year.
geographic area. the institute closely monitors the extension of
credit to its customers while maintaining allowances for potential Revenue related to affinity contracts is recognized when earned, in
credit losses. on a periodic basis, the institute evaluates its trade accordance with the respective agreements.
receivables and establishes an allowance for doubtful accounts,
based on a history of past write-offs and collections and current Advertising revenue is recorded as print or electronic publications
credit considerations. As of July 31, 2010 and 2009, the allowance are issued.
for doubtful accounts was $1,762,000 and $2,418,000. Revenue is recognized net of any related sales taxes.
notes and mortgages received by the Benevolent fund in the AiCpA entered into a third-party agreement that provides
connection with assistance payments to members and their families for the AiCpA to break even with regard to certain external and
are recorded as assets, net of amounts deemed uncollectible. internal costs incurred in developing, maintaining and providing
notes and mortgages are noninterest bearing and are due upon the computerized uniform CpA examination (examination).
the death of the member and spouse and/or sale of the mortgaged Accordingly, such costs have been deferred and are reflected in
property. Credit risk with respect to receivables is limited because the accompanying statements of financial position net of revenue
the Benevolent fund secures mortgages from a limited number recognized (see note 8).
of payment recipients in a wide geographic area. the Benevolent
fund closely monitors the extension of notes and mortgages to its Contributions are recorded as unrestricted, temporarily restricted or
members while maintaining allowances for potential losses. on a permanently restricted when received depending on the existence
periodic basis, the Benevolent fund evaluates its receivables and and/or nature of any donor restrictions. Donated investments are
establishes an allowance for doubtful accounts, based on a history recorded as contributions at their estimated fair values on the date
of past write-offs and collections and current credit considerations. of donation. unconditional promises to give that are expected to
be collected within one year are recorded at net realizable value.
the institute is exposed to loss in the event of nonperformance by unconditional promises to give that are expected to be collected
the counterparty on the interest rate swap contract used in hedging in future years are recorded at the present value of their future
activities. the counterparty is a large financial institution and the cash flows. the discounts on those amounts are computed using
institute does not anticipate nonperformance by the counterparty. risk-adjusted interest rates applicable to the years in which the
Consequently, as of July 31, 2010, the institute has no significant promises are received. Amortization of the discounts is included in
concentrations of credit risk.

09-10 AnnuAL RepoRt 43

 contribution revenue. Conditional promises to give are not included capitalized. upgrades and enhancements that result in additional
as support until the conditions are substantially met. functionality to existing software, which enable it to perform tasks
that it was previously incapable of performing, are also capitalized.
A large number of people have contributed significant amounts of
time to the activities of the institute. the financial statements do not Exit and disposal activities:
reflect the value of these contributed services because they do not the institute recognizes costs associated with exit or disposal
meet the criteria for recognition. activities when the liability is incurred rather than the date an entity
Promotions and advertising: commits to an exit plan and measures that liability at fair value.

Costs of promotions and advertising are expensed as incurred. Income taxes:

total promotion and advertising expenses were $6,096,000 and the AiCpA and ARA are organized as 501(c)(6) not-for-profit
$6,678,000 for the years ended July 31, 2010 and 2009. organizations under the internal Revenue Code (Code). Certain
Accounting for website and software development costs: income of the AiCpA, however, is subject to taxation. the
Benevolent fund and foundation are organized as 501(c)(3)
All costs incurred in the planning stage of developing a website are
not-for-profit organizations under the Code. C2B and northStar
expensed as incurred as are internal and external training costs and
are organized as for-profit entities. northStar, however, is organized
maintenance costs. fees incurred to internet service providers in
as a single member LLC. As a single member LLC, any taxable
return for hosting a website on their servers are expensed over the
income or loss of the LLC is passed on to the member and taxable
period of benefit.
in accordance with the member’s tax status. Accordingly, northStar’s
fees paid to consulting firms that develop computer systems and unrelated business income will be incorporated into the unrelated
software used for the institute’s internal reporting and management business income of the AiCpA.
functions are deferred and amortized on the straight-line method
C2B accounts for income taxes pursuant to the asset and liability
over a three- to five-year period that begins when the system
method, which requires deferred income tax assets and liabilities to
becomes operational.
be computed annually for temporary differences between the
external and internal costs, excluding general and administrative financial statement and tax bases of assets and liabilities that will
costs and overhead costs, incurred during the application result in taxable or deductible amounts in the future based on
development stage of internal use website software are capitalized. enacted tax laws and rates applicable to the periods in which the
Such costs include external direct costs of materials and services temporary differences are expected to affect taxable income.
consumed in developing or obtaining website software, payroll Valuation allowances are established when necessary to reduce
and payroll-related costs for employees who are directly associated deferred tax assets to the amount expected to be realized.
with and who devote time to developing website software, and
the institute adopted the new accounting for uncertainty in income
interest costs incurred while developing website software.
taxes guidance on August 1, 2009. the adoption of that guidance
upgrades and enhancements that result in additional functionality
did not result in the recognition of any unrecognized tax benefits
to the website software, which enable it to perform tasks that it was
and the institute has no unrecognized tax benefits at July 31, 2010.
previously incapable of performing, are also capitalized.
the institute’s u.S. federal income tax returns prior to fiscal year
Capitalized internal use website development costs are amortized 2007 are closed and management continually evaluates expiring
on the straight-line method over its estimated useful life of three statutes of limitations, audits, proposed settlements, changes in tax
years and begins when all substantial testing of the website is law and new authoritative rulings.
completed and the website is ready for its intended use.
As of July 31, 2010, the institute did not recognize any interest and
All costs in the preliminary project stage for other computer penalties associated with tax matters.
software developed for internal use are expensed as incurred.
internal and external costs, excluding general and administrative
costs, incurred during the application development stage are

44 A i C pA : f i n A n C i A L S
Stock-based compensation: Subsequent events:
C2B adopted the preferable fair value recognition provisions for the institute has evaluated events and transactions for potential
accounting for stock-based compensation. recognition or disclosure through September 24, 2010, which is the
date the financial statements were available to be issued.
All stock-based awards to employees, including grants of stock
options, are recognized as compensation costs based on their fair
values measured at the date of grant. C2B has not issued any grants NOTE 3. INVESTMENTS:
since 2003. for the years ended July 31, 2010 and 2009, there has
been no stock-based compensation expense recorded. investments consist of:
2010 2009
Employee benefit plans: ($000)
the institute sponsors a defined benefit pension plan and reports
equity securities $ 64,267 $ 55,486
the funded status of the plan in its statement of financial position
fixed income securities 30,457 27,569
and measures the plan assets and benefit obligations as of July 31.
Limited partnership 7,301 6,813
in December 2008, authoritative guidance was issued that requires total fair value 102,025 89,868
employers to provide additional disclosures about plan assets unrealized losses (5,434) (15,409)
of a defined benefit pension or other post-retirement plan. total cost $ 107,459 $ 105,277
the objective of this guidance was to provide users of financial
investment income (loss) consists of:
statements with an understanding of how investment allocation
decisions are made, the major categories of plan assets held by 2010 2009
the plans, the inputs and valuation techniques used to measure ($000)
the fair value of plan assets, significant concentration of risk within Dividends and interest $ 2,405 $ 2,557
the institute’s plan assets, and fair value measurements determined
Realized losses (385) (2,898)
using significant unobservable inputs of a reconciliation of changes
unrealized gains (losses) 9,975 (9,923)
between the beginning and ending balances. the institute adopted
$ 11,995 $ (10,264)
the new disclosure requirements for the year ended July 31, 2009.

Codification:
in June 2009, the financial Accounting Standards Board (fASB)
issued authoritative guidance regarding accounting standards
codification and the hierarchy of u.S. generally accepted accounting
principles (u.S. GAAp). this guidance has become the source of the
authoritative u.S. GAAp recognized by the fASB and applied by
nongovernmental entities. this guidance was effective for financial
statements issued for interim and annual periods ending after
September 15, 2009. the institute adopted the provisions of this
guidance for the fiscal year ended July 31, 2010 and the adoption
of this guidance did not have a material impact on the institute’s
financial statements.

09-10 AnnuAL RepoRt 45

 NOTE 4. FAIR VALUE MEASUREMENTS:

the institute values its financial assets and liabilities based on the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date. in order to increase consistency and comparability
in fair value measurements, a fair value hierarchy that prioritizes observable and unobservable inputs is used to measure fair value into three
broad levels, which are described below:
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or
liabilities. the fair value hierarchy gives the highest priority to Level 1 inputs.
Level 2: observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in
inactive markets; or model-derived valuations in which all significant inputs are observable or can be derived
principally from or corroborated with observable market data.
Level 3: unobservable inputs are used when little or no market data is available. the fair value hierarchy gives the lowest
priority to Level 3 inputs.
in determining fair value, the institute utilizes valuation techniques that maximize the use of observable inputs and minimize the use of
unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.
financial assets and liabilities carried at fair value at July 31, 2010 and 2009 are classified in the tables below in one of the three categories
described above:
2010
Fair Value Measurements Using
Level 1 Level 2 Total
($000)
Equity securities:
u.S. Large-Cap growth $ 9,609 $ 9,609
u.S. Large-Cap value 14,168 14,168
u.S. Mid-Cap growth 6,284 6,284
u.S. Mid-Cap value 5,236 5,236
u.S. Small-Cap core 10,135 10,135
international value 13,196 13,196
Real estate 5,639 5,639

Fixed income securities:

u.S. Government, corporate
bonds – long-term 29,936 29,936
u.S. Government, corporate
bonds and other fixed income 521 521

Limited partnership:
international core $ 7,301 7,301
total assets measured at fair value $ 94,724 $ 7,301 $ 102,025

Financial derivative instruments:

interest rate swap $ – $ 2,752 $ 2,752
total liabilities measured at fair value $ – $ 2,752 $ 2,752

46 A i C pA : f i n A n C i A L S
 2009
Fair Value Measurements Using
Level 1 Level 2 Total
($000)
Equity securities:
u.S. Large-Cap growth $ 8,622 $ 8,622
u.S. Large-Cap value 12,293 12,293
u.S. Mid-Cap growth 5,178 5,178
u.S. Mid-Cap value 4,433 4,433
u.S. Small-Cap core 8,795 8,795
international value 12,085 12,085
Real estate 4,080 4,080

Fixed income securities:

u.S. Government, corporate
bonds – long-term 26,513 26,513
u.S. Government, corporate
bonds and other fixed income 1,056 1,056

Limited partnership:
international core $ 6,813 6,813
total assets measured at fair value $ 83,055 $ 6,813 $ 89,868

Financial derivative instruments:

interest rate swap $ – $ 2,206 $ 2,206
total liabilities measured at fair value $ – $ 2,206 $ 2,206

investments in equity securities and fixed income securities are valued using market prices on active markets (Level 1). Level 1 instrument
valuations are obtained from real-time quotes for transactions in active exchange markets involving identical assets.

the investment in limited partnership is designated as a Level 2 instrument and valuations are obtained from readily available pricing
sources for comparable instruments. the investment in limited partnership has certain redemption restrictions. Withdrawals can be made
from the capital account at the end of each month by giving prior notice to the general partner on or before the fifteenth day of such
month. once the withdrawal is made, it cannot be cancelled without the general partner’s written consent to such cancellation. Withdrawal
payments are made as soon as practicable, generally not more than ten business days after the withdrawal date, but the general partner
intends to pay withdrawal proceeds as quickly as possible.

to estimate the fair value of the interest rate swap liability as of the measurement date, the institute obtains inputs other than quoted prices
that are observable for the liability. these inputs include current interest rates and consider nonperformance risk of the institute and that of
its counterparties.

the preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of
future fair values. furthermore, although the institute believes its valuation methods are appropriate and consistent with other market
participants, the use of different methodologies or assumptions to determine fair value of certain financial instruments could result in
a different fair value measurement at the reporting date. there have been no changes in the fair value methodologies used at July 31, 2010
and 2009.

09-10 AnnuAL RepoRt 47

 Assets and liabilities measured at fair value on a recurring basis were presented on the institute’s statements of financial position as of
July 31, 2010 and 2009 as follows:

2010 2009
Level 1 Level 2 Total Level 1 Level 2 total
($000) ($000)

investments $ 94,724 $ 7,301 $ 102,025 $ 83,055 $ 6,813 $ 89,868

Accounts payable and

other liabilities $ – $ 2,752 $ 2,752 $ – $ 2,206 $ 2,206

the following table sets forth the investment strategies and redemption terms for those investments that are measured at net asset values
per share as of July 31, 2010:
Redemption Redemption
Investment Name Fair Value Frequency Period
Allianz CCM Capital Appreciation fund $ 9,370 Daily nA
Managers AMG essex Large Cap Growth fund 171 Daily nA
t. Rowe price Science & technology fund 68 Daily nA
Artisan Mid Cap fund 6,284 Daily nA
frontegra ironBridge Small Cap fund 10,135 Daily nA
Dodge & Cox income fund 29,936 Daily nA
Dreyfus Global Real estate Securities fund 5,639 Daily nA
thornburg international Value fund 13,196 Daily nA
Mondrian All Countries World ex-uS equity fund, Lp 7,301 Monthly 15 days
Wells fargo Money Market fund 521 Daily nA

Total $ 82,621

there are no unfunded commitments in these investments.

Allianz CCM Capital Appreciation Fund: the fund seeks to achieve its objective by normally investing at least 65% of its assets in
common stocks of companies with market capitalization of $3 billion or more that have improving fundamentals (based on growth criteria)
and whose stock the portfolio management team believes to be reasonably valued by the market (based on value criteria).

Managers AMG Essex Large Cap Growth Fund: the fund invests at least 80% of its net assets in securities of large-capitalization
companies. the fund normally invests primarily in common and preferred stocks of u.S. companies.

T. Rowe Price Science & Technology Fund: the fund will normally invest at least 80% of its net assets in the common stocks of companies
expected to benefit from the development, advancement, and use of science and/or technology. While most assets will be invested in u.S.
common stocks, the fund may invest in other securities, including foreign stocks, and use futures and options in keeping with the fund’s
objectives.

Artisan Mid Cap Fund: the fund employs a bottom-up investment process to construct a diversified portfolio of u.S. mid-cap growth
companies. the fund’s investment process focuses on two distinct areas - security selection and capital allocation.

Frontegra IronBridge Small Cap Fund: the fund invests, under normal conditions, at least 80% of its assets in equity securities of
companies with small market capitalizations.

48 A i C pA : f i n A n C i A L S
Dodge & Cox Income Fund: the fund invests in a diversified NOTE 6. GOODWILL AND OThER INTANGIBLE ASSETS:
portfolio of high-quality bonds and other fixed income
Goodwill and other intangible assets are as follows:
securities. At least 65% of the fund’s total assets will be invested
in u.S. Government obligations, mortgage and asset-backed 2010 2009
securities, corporate and municipal bonds, collateralized mortgage ($000)
obligations (CMos), and other fixed income securities rated A or
Goodwill $ 12,553 $ 12,553
better by S&p, Moody’s or fitch.
other intangible assets:
Dreyfus Global Real Estate Securities Fund: the fund normally
Contracts and technology 5,645 5,645
invests at least 80% of its assets in publicly traded equity securities
Less accumulated amortization 5,645 5,645
of companies principally engaged in the real estate sector. the fund
Contracts and technology, net – –
normally invests in a global portfolio of equity securities of real estate
companies, including real estate investment trusts (Reits) and real $ 12,553 $ 12,553
estate operating companies, with principal places of business located
in, but not limited to, the developed markets of europe, Australia, there was no amortization expense on intangible assets with
Asia and north America (including the united States). definite lives for the years ended July 31, 2010 and 2009.

Thornburg International Value Fund: the fund invests primarily the institute performs an annual impairment test of goodwill
in foreign securities and, under normal market conditions, invests at and other intangible assets in the fourth quarter of each year. fair
least 75% of its assets in foreign securities or depository receipts of value is estimated using the expected present value of future
foreign securities. cash flows. Goodwill was not impaired for the years ended
July 31, 2010 and 2009.
Mondrian All Countries World Ex-US Equity Fund, LP: the fund
pursues its investment objective primarily by investing in the global
equity securities of non-u.S. issuers, including the securities of NOTE 7. LONG-TERM DEBT:
emerging market companies. equity securities in which the fund
Long-term debt consists of the following:
may invest include, but are not limited to, common stocks, preferred
stocks, convertible securities, index related securities, certain 2010 2009
nontraditional equity securities and warrants. ($000)

Wells Fargo Government Money Market Fund: the fund invests AiCpA (A) $ 1,429 $ 2,857
exclusively in high-quality, short-term money market instruments AiCpA (B) 36,750 42,000
that consist of u.S. Government obligations and repurchase $ 38,179 $ 44,857
agreements collateralized by u.S. Government obligations. the
investments may have fixed, floating or variable rates of interest. (A) noninterest bearing note payable to prometric, inc. (prometric –
see note 8).

NOTE 5. FURNITURE, TEChNOLOGy AND LEASEhOLD (B) term note payable in 27 consecutive quarterly installments
IMPROVEMENTS: commencing october 30, 2009 payable as follows: $1,000,000 for
the first three quarters ending April 30, 2010; $2,250,000 for the
furniture, technology and leasehold improvements consist of:
following four quarters ending April 30, 2011; $2,500,000 for the
2010 2009 following four quarters ending April 30, 2012; and $1,250,000 for the
($000) remaining sixteen quarters ending April 29, 2016. interest is payable
furniture $ 4,634 $ 4,650 at LiBoR plus 155 basis points.
technology 21,549 19,131 the term note of $36,750,000 is collateralized by certain investments,
Leasehold improvements 13,139 13,190 which may not fall below 125% of the sum of the outstanding principal
39,322 36,971 balance of the term note at any time. At July 31, 2010, the collateral
Less accumulated depreciation had a market value of $85,688,000. the guarantor of the term note is
and amortization 21,898 18,762
northStar.
$ 17,424 $ 18,209
09-10 AnnuAL RepoRt 49
 interest expense for the years ended July 31, 2010 and 2009 was the AiCpA receives fees through nASBA based upon the number
$2,908,000 and $3,354,000. of examinations taken. the agreement provides for the AiCpA
Based on borrowing rates currently available, the fair value of to “break even” with regard to costs incurred in developing and
long-term debt at July 31, 2010 and 2009 approximates $38,140,000 maintaining the examination. through July 31, 2010, approximately
and $44,763,000. $91,175,000 of revenue and $109,517,000 of costs have been
incurred. During the years ended July 31, 2010 and 2009, the AiCpA
principal amounts due under the above obligations in each of the five
recognized revenue of approximately $24,478,000 and $21,562,000.
years subsequent to July 31, 2010 and thereafter are as follows:
Accordingly, costs equal to the revenue recognized have been
year Ending expensed. At July 31, 2010 and 2009, the balances of $18,342,000
July 31, Amount and $33,290,000 are included in deferred costs and prepaid
($000) expenses in the accompanying statements of financial position.
2011 $ 9,250
prometric has provided the AiCpA with a $10,000,000 interest-free
2012 10,179 line of credit to facilitate the conversion of the examination from
2013 5,000 a paper-based to a computer-based format. Beginning with the
2014 5,000 commencement of the computerized examination, the AiCpA is
2015 5,000 required to repay the borrowings in annual principal payments
Years subsequent to 2015 3,750 equal to $4.00 per test section administered by prometric but not
$ 38,179 less than one-seventh of the amount borrowed as of the date of the
commencement of the computerized examination. the initial term
the term loan as noted in (B) above has an interest rate swap contract of the agreement is seven years from the date of commencement.
which expires on April 30, 2016, and was executed to reduce the impact However, during the year ended July 31, 2010, the AiCpA, nASBA
on interest expense fluctuations on the $36,750,000 notional amount of and prometric extended the terms of the contract to 2024.
its variable rate debt. the contract, designated as a cash flow hedge, the candidate volume is estimated approximately two years in
effectively converted the variable rate to a fixed rate of 5.77%. At advance. prometric uses a tier-based volume pricing schedule
July 31, 2010 and 2009, the fair value of the interest rate swap was a to determine its fee to provide the examination. if the estimated
liability of approximately $2,752,000 and $2,206,000 and have been volume is greater than the actual volume, the AiCpA is required
reflected as a component of accounts payable and other liabilities in to pay prometric an additional fee. if the actual volume is greater
the statements of financial position. the corresponding adjustment than the estimated volume, prometric is required to reimburse
to interest expense is reflected separately as a component of other the AiCpA. Any net amounts paid or received by the AiCpA affect
charges in the statements of activities. future fee determinations under the “break even” provisions of
the agreement. for the years ended July 31, 2010 and 2009, the
AiCpA received $5,415,000 and $2,274,000 from prometric, which is
NOTE 8. COMMITMENTS AND CONTINGENCIES:
included as a reduction in deferred costs and prepaid expenses in
the accompanying statements of financial position.
Computerization of the Uniform CPA Examination:
in connection with the examination, the AiCpA is party to an
Lease commitments:
agreement with the national Association of State Boards of the institute has several long-term leases for the rental of real
Accountancy (nASBA) and prometric. pursuant to the agreement, estate. the leases include provisions for the abatement of rental
the AiCpA delivered the examination in a computer-based format payments, amounts to be paid to the institute by the landlords,
in April 2004. nASBA developed and maintains the national as well as scheduled base rent increases over the respective
Candidate Database, which serves as the gateway for candidates lease terms.
applying to take the examination. prometric is responsible for the total amount of the base rent payments, net of the amounts
providing scheduling, test preparation, test delivery and results to be paid to the institute by the landlords, is being charged
processing of the examination in a computer-based testing to expense using the straight-line method over the respective
environment consistent with AiCpA and nASBA requirements. lease terms.

50 A i C pA : f i n A n C i A L S
Minimum rental commitments on noncancelable real estate and Line of credit:
equipment leases in effect as of July 31, 2010, exclusive of future the AiCpA has available a line of credit with a bank for short-term
escalations for real estate taxes and building operating expenses, borrowings of up to $27,000,000 at the bank’s prevailing interest
less future minimum sublease rentals, are: rate. Amounts outstanding under the line of credit are collateralized
year Ending by certain investments (see note 7). there were no outstanding
July 31, Amount borrowings at July 31, 2010 beyond the letters of credit. the line of
($000) credit expires on April 30, 2012.
2011 $ 10,473
Litigation:
2012 9,506
from time to time the institute is a defendant in actions arising in
2013 6,408
the ordinary course of business. in the opinion of management,
2014 6,334
such litigation will not have a material adverse effect on the
2015 6,584
institute’s financial condition or change in net assets.
Years subsequent to 2015 37,885
77,190
Less future minimum sublease rentals (A) 2,963 NOTE 9. EMPLOyEE BENEFIT PLANS:
net future minimum rental commitments $ 74,227
Defined benefit pension plan:
(A) During 2000, the AiCpA entered into a noncancelable sublease. the institute sponsors a noncontributory defined benefit pension
the total of minimum rentals to be received in the future under plan for qualifying employees. the amount of the annual benefit
this sublease, which expires in 2012, amounts to $2,963,000 as of to be paid at normal retirement date is based on credited service,
July 31, 2010. the future sublease income has been considered which varies based on participant hire dates.
as part of the accrued relocation expenses (see note 14).
economic assumptions used to determine the benefit obligations
Rental expense for the years ended July 31, 2010 and 2009 recognized in the statements of financial position are:
was $7,099,000 and $7,176,000. Rental expense excludes rental July 31, 2010 July 31, 2009
payments on the AiCpA’s Jersey City, new Jersey (Jersey City) Discount rate 5.45% 6.25%
location that have been accounted for as part of the accrued Rate of compensation increase 4.00% 4.00%
relocation expenses (see note 14).

Other commitments: Weighted average assumptions used to determine the net periodic
the institute has other commitments for service agreements in benefit cost are:
place with various vendors. Minimum commitments in effect as of July 31, 2010 July 31, 2009
July 31, 2010 are: Discount rate 6.25% 7.38%
expected return on plan assets 8.25% 8.25%
year Ending Rate of compensation increase 4.00% 4.00%
July 31, Amount
($000) the institute is utilizing a yield curve methodology to determine
its discount rate. this methodology uses a weighted average yield
2011 $ 1,814
to determine the plan’s discount rate by forecasting the plan’s
2012 252
expected benefit payments by year.
2013 232
the expected return on plan assets was derived by reviewing
Letters of credit: historical returns, preparing several models about future expected
As of July 31, 2010, the institute has irrevocable standby letters returns using the current diversified asset mix and conducting a
of credit associated with its north Carolina and Washington, DC historical study of market recoverability.
leases of $167,000 and $120,000, which expire on July 31, 2011 and
for the year ending July 31, 2011, the institute expects to contribute
January 20, 2011.
$5,800,000 to the defined benefit pension plan.

09-10 AnnuAL RepoRt 51

 the following tables provide further information about the institute’s estimated future defined benefit pension payments reflecting
pension plan: expected future service for each of the five years subsequent to
July 31, 2010 and in the aggregate for the five years thereafter are
July 31, 2010: Amount
as follows:
($000)
Benefit obligation $ 101,449 year Ending
fair value of plan assets, net of plan liabilities of $236 68,206 July 31, Amount

net unfunded status of the plan recognized ($000)

as a liability in the statement of financial position $ 33,243 2011 $ 4,260
employer contributions $ 4,800 2012 4,440
2013 4,580
Benefit payments $ (3,812)
2014 4,760
Accumulated benefit obligation $ 95,401
2015 5,080
periodic benefit cost for the year ended $ 2,345 2016 – 2020 29,820
July 31, 2009: the plan was amended in 2007 to provide that no further benefit
Benefit obligation $ 87,948 accruals will occur after April 30, 2017.
fair value of plan assets, net of plan liabilities of $138 58,830 the institute’s overall investment strategy is to provide for growth of
net unfunded status of the plan recognized capital with a moderate level of volatility. the expected long-term
as a liability in the statement of financial position $ 29,118 rate of return for the plan’s assets is based on the expected return
employer contributions $ 2,650 of each of the asset categories, weighted based on the median of
Benefit payments $ (3,869) the target allocation for the class. All investments are chosen with
care, skill, prudence and due diligence with the assistance of a paid
Accumulated benefit obligation $ 82,235
investment consultant. performance of each investment manager is
periodic benefit cost for the year ended $ 903
reviewed quarterly and interviews of each investment manager are
generally conducted within a two-year cycle by an investment
Amounts in unrestricted net assets that have not yet been
committee comprised of institute members with investment industry
recognized as a component of net periodic benefit cost comprise
experience. investment risk is managed in several ways, including,
the following:
but not limited to, the creation of a diversified portfolio across
Unrecognized Actuarial
multiple asset classes and geographic regions. A listing of
Prior Service Cost Loss
permitted and prohibited investments is maintained in the institute’s
($000)
Statement of investment policy, dated August 2010.
Balance, July 31, 2008 $ 219 $ 1,211
increase during 2009 141 26,685 During the year ended July 31, 2010, the institute’s investment
Amortization during 2009 (29) – consultant conducted a study on behalf of the investments
committee, which reviewed the duration of the plan’s assets
Balance, July 31, 2009 331 27,896 and obligations (Asset-Liability Study). the Asset-Liability Study
increase during 2010 1,047 6,182 concluded that to better match the duration of the plan’s assets and
Amortization during 2010 (39) (610) obligations, the plan’s asset allocation to fixed income investments
should increase and the plan’s asset allocation to equity investments
Balance, July 31, 2010 $ 1,339 $ 33,468 should decrease. in May 2010, the institute, with the approval of the
Board of Directors, modified the target asset allocations to be 50%
the amounts in unrestricted net assets and expected to be fixed income investments, 45% equity investments and 5% to other
recognized as a component of net periodic benefit cost for types of investments. fixed income investments primarily include
the year ending July 31, 2011 are $159,000 and $1,320,000, securities issued or guaranteed by the u.S. Government, its agencies
representing amortization of net prior service cost and or government-sponsored enterprises, as well as corporate bonds
amortization of actuarial loss. from diversified industries and mortgage-backed and asset-backed

52 A i C pA : f i n A n C i A L S
securities. equity investments include investments of large-cap, mid-cap and small-cap companies located in the united States as well as
investments of non-united States based companies. other types of investments include an investment in a limited partnership that holds
positions in non-united States based companies.

in addition, the Asset-Liability Study concluded that the institute should adopt a dynamic asset allocation strategy for the plan, which is
intended to reduce volatility with the plan’s funded status as the funded status improves over time. As the plan’s funded strategy improves,
the institute will increase the target allocation of the plan’s assets in fixed income investments and decrease the overall target allocation of
the plan’s assets in equity investments. this strategy was adopted by the Board of Directors in August 2010.

the fair values of the institute’s pension plan assets at July 31, 2010 and 2009 and by asset category are as follows:

2010
Fair Value Measurements Using
Level 1 Level 2 Total
($000)
Equity securities:
u.S. Large-Cap growth $ 4,404 $ 4,404
u.S. Large-Cap value 6,105 6,105
u.S. Mid-Cap growth 2,556 2,556
u.S. Mid-Cap value 2,398 2,398
u.S. Small-Cap core 4,348 4,348
international value 5,966 5,966
Real estate 2,682 2,682

Fixed income securities:

u.S. Government, corporate bonds
and other fixed income funds 36,901 36,901

other – international core $ 3,082 3,082

$ 65,360 $ 3,082 $ 68,442

2009
Fair Value Measurements Using
Level 1 Level 2 Total
($000)
Equity securities:
u.S. Large-Cap growth $ 5,638 $ 5,638
u.S. Large-Cap value 8,059 8,059
u.S. Mid-Cap growth 3,335 3,335
u.S. Mid-Cap value 2,936 2,936
u.S. Small-Cap core 5,815 5,815
international value 7,989 7,989
Real estate 2,666 2,666

Fixed income securities:

u.S. Government, corporate bonds
and other fixed income funds 18,030 18,030

other – international core $ 4,500 4,500

$ 54,468 $ 4,500 $ 58,968

09-10 AnnuAL RepoRt 53

 the following table sets forth the investment strategies and redemption terms for those investments that are measured at net asset values
per share as of July 31, 2010:
Redemption Redemption
Investment Name Fair Value Frequency Period
Allianz CCM Capital Appreciation fund $ 4,404 Daily nA
Artisan Mid Cap fund 2,556 Daily nA
frontegra ironBridge Small Cap fund 4,348 Daily nA
Dodge & Cox income fund 6,979 Daily nA
piMCo Long-term u.S. Government fund 7,404 Daily nA
piMCo Long Duration total Return fund 21,742 Daily nA
Dreyfus Global Real estate Securities fund 2,682 Daily nA
thornburg international Value fund 5,966 Daily nA
Mondrian All Countries World ex-uS equity fund, Lp 3,082 Monthly 15 days
first American Government obligations fund 762 Daily nA

Total $ 59,925

there are no unfunded commitments in these investments.

Allianz CCM Capital Appreciation Fund: the fund seeks to achieve its objective by normally investing at least 65% of its assets in common stocks
of companies with market capitalization of $3 billion or more that have improving fundamentals (based on growth criteria) and whose stock the
portfolio management team believes to be reasonably valued by the market (based on value criteria).

Artisan Mid Cap Fund: the fund employs a bottom-up investment process to construct a diversified portfolio of u.S. mid-cap growth companies.
the fund’s investment process focuses on two distinct areas – security selection and capital allocation.

Frontegra IronBridge Small Cap Fund: the fund invests, under normal conditions, at least 80% of its assets in equity securities of companies with
small market capitalizations.

Dodge & Cox Income Fund: the fund invests in a diversified portfolio of high-quality bonds and other fixed income securities. At least 65% of
the fund’s total assets will be invested in u.S. Government obligations, mortgage and asset-backed securities, corporate and municipal bonds,
collateralized mortgage obligations (CMos), and other fixed income securities rated A or better by S&p, Moody’s or fitch.

PIMCO Long-Term U.S. Government Fund: the fund seeks to achieve its investment objective by investing under normal circumstances at
least 80% of its assets in a diversified portfolio of fixed income securities that are issued or guaranteed by the u.S. Government, its agencies or
government-sponsored enterprises, which may be represented by forwards or derivatives such as options, future contracts or swap agreements.

PIMCO Long Duration Total Return Fund: the fund seeks to achieve its investment objective by investing under normal circumstances at
least 65% of its total assets in a diversified portfolio of fixed income instruments of varying maturities, which may be represented by forwards or
derivatives such as options, futures, contracts or swap agreements. “fixed income instruments” include bonds, debt securities and other similar
instruments issued by various u.S. and non-u.S. public- or private-sector entities.

Dreyfus Global Real Estate Securities Fund: the fund normally invests at least 80% of its assets in publicly traded equity securities of companies
principally engaged in the real estate sector. the fund normally invests in a global portfolio of equity securities of real estate companies, including
real estate investment trusts (Reits) and real estate operating companies, with principal places of business located in, but not limited to, the
developed markets of europe, Australia, Asia and north America (including the united States).

54 A i C pA : f i n A n C i A L S
Thornburg International Value Fund: the fund invests primarily in the following table provides further information about the institute’s
foreign securities and, under normal market conditions, invests at least postretirement plan:
75% of its assets in foreign securities or depository receipts of foreign
July July
securities.
31, 2010 31, 2009
Mondrian All Countries World Ex-US Equity Fund, LP: the fund ($000)
Benefit obligation $ 8,208 $ 7,815
pursues its investment objective primarily by investing in the global
equity securities of non-u.S. issuers, including the securities of emerging net unfunded status of the plan
market companies. equity securities in which the fund may invest recognized as a liability in the
include, but are not limited to, common stocks, preferred stocks, statement of financial position $ 8,208 $ 7,815
convertible securities, index related securities, certain non-traditional
employer contributions $ 595 $ 592
equity securities and warrants.
Benefit payments $ (878) $ (815)
First American Government Obligations Fund: the fund invests
exclusively in short-term u.S. Government securities, including projected benefit obligation $ 8,208 $ 7,815
repurchase agreements secured by u.S. Government securities. periodic benefit cost for the year ended $ 190 $ 210
Postretirement plan:
Amounts in unrestricted net assets that have not yet been
the institute sponsors employee postretirement health care
recognized as a component of net periodic benefit cost comprise
and life insurance plans for qualifying employees hired before
the following:
May 1, 2003 and contributes toward the annual cost of retirees
Unrecognized Actuarial
remaining in these plans.
Prior Service Credit Loss
economic assumptions used to determine the benefit obligations ($000)
recognized in the statements of financial position are: Balance, July 31, 2008 $ (3,507) $ 589
increase during 2009 – 516
July July
Amortization during 2009 358 –
31, 2010 31, 2009
Balance, July 31, 2009 (3,149) 1,105
Discount rate 5.12% 6.10%
increase during 2010 – 467
Weighted average assumptions used to determine the net periodic Amortization during 2010 358 (27)
benefit cost are: Balance, July 31, 2010 $ (2,791) $ 1,545
July July
31, 2010 31, 2009 the amounts in unrestricted net assets and expected to be recognized
as a component of net periodic benefit cost for the year ending
Discount rate 5.12% 6.10%
July 31, 2011 are ($358,000) and $62,000, representing amortization
the institute is utilizing a yield curve methodology to determine of net prior service credit and amortization of actuarial loss.
its discount rate. this methodology uses a weighted average yield
to determine the plan’s discount rate by forecasting the plan’s the weighted average health care cost trend rate used in measuring
expected benefit payments by year. the postretirement benefit expense is 5%. for those retiring prior to
May 1, 2003, the plan is assumed to meet the actuarial equivalence
for the year ending July 31, 2011, the institute expects to contribute
definition of Medicare part D. this conclusion is based upon
$645,000 to the postretirement plan.
guidance issued to date and an analysis of the plan’s prescription
programs compared to Medicare part D. no subsidy was received
during the year ended July 31, 2010.

09-10 AnnuAL RepoRt 55

 Defined contribution plans: developed a new portfolio of products and services unrelated to the
the AiCpA and C2B also sponsor separate 401(k) defined AiCpA, including, among other things, Business Solutions programs,
contribution plans covering substantially all employees meeting e-newsletters, a Career Center job board and online third party
minimum age and service requirements. participation in the product stores.
plans is optional. the AiCpA’s plan was amended effective Summarized financial information of C2B as of and for the years
August 1, 2009 to change the nature of all employer contributions ended July 31, 2010 and 2009 is as follows:
as discretionary based on meeting certain financial and
operating targets as determined by the AiCpA’s Board of Directors. 2010 2009
in August 2010, the AiCpA’s Board of Directors approved a ($000)
discretionary contribution for the year ended July 31, 2010, total assets $ 20,609 $ 21,345
equal to 95% of the eligible match, which is calculated as a total liabilities $ 8,020 $ 9,288
certain percentage of employee contributions and is included in preferred stock 48,201 58,657
accounts payable and other liabilities as of July 31, 2010. employer Common stockholders’ deficiency (35,612) (46,600)
contributions for the C2B plan are made in amounts equal to a
total liabilities and equity $ 20,609 $ 21,345
certain percentage of employee contributions. the cost of these
plans was $2,260,000 and $2,137,000 for the years ended total revenue (A) $ 19,434 $ 17,792
July 31, 2010 and 2009. net income $ 755 $ 351

Deferred compensation:
(A) includes approximately $11,154,000 and $9,286,000 in
the AiCpA has a nonqualified deferred compensation plan for
commissions for services rendered for marketing and
certain key employees. Amounts accrued under this plan are
promotion of certain AiCpA product lines and approximately
$1,707,000 and $1,056,000 as of July 31, 2010 and 2009 and are
$8,280,000 and $8,506,000 for Business Solutions, affinity,
included in the accompanying statements of financial position as
technology services and other business lines for the years
a component of accounts payable and other liabilities.
ended July 31, 2010 and 2009.

NOTE 10. CPA2Biz, INC.: As of July 31, 2010 and 2009, the aggregate number of shares of all
classes of stock which C2B is authorized to issue is (i) 120,000,000
As discussed in note 1, C2B is the exclusive online and offline shares of common stock, par value $.01 per share (Common Stock)
marketing agent for certain AiCpA products and services and and (ii) 40,000,000 shares of preferred stock, par value $.01 per
maintains the e-commerce website (cpa2biz.com) for the sale share, of which 24,000,000 shares have been designated 8%
of AiCpA products. in return for these services, C2B receives Series A Convertible preferred Stock (Series A) and 8,000,000 shares
commissions on sales of products marketed for the AiCpA. designated 8% Series B Convertible preferred Stock (Series B).
However, the AiCpA has control of largely all product and
service-related assets, and the intellectual property incorporated As of July 31, 2010 and 2009, the 8,000,000 authorized shares of
in them. C2B accounts for the revenue on sales of AiCpA products preferred stock, which are not considered to be either Series A or
net as an agent. the net amount is the amount charged to the Series B, have not been issued.
customer less the amount paid to the supplier, which in most cases
Common Stock has voting rights, but no liquidation privileges.
is the AiCpA.
Dividends may only be paid after the holders of both Series A and
in addition to providing the AiCpA with marketing services, C2B also Series B have received the dividends to which they are entitled for
receives fees for providing certain technology services to the AiCpA that year.
such as integration of the C2B website with the AiCpA back-end
Series A and Series B have rights to a liquidation preference
systems. further, C2B manages and supports the marketing of all
whereby the Series A is senior to Series B and both are senior to
of the AiCpA’s affinity programs and shares in the affinity revenue,
Common Stock. Series A and Series B also have rights to an
except for the insurance and retirement programs. Lastly, C2B has
8% noncumulative dividend, when and if declared by the Board of

56 A i C pA : f i n A n C i A L S
Directors of C2B, as well as a conversion right into Common Stock July 31, 2010 and 2009 was $1,793,000 and $1,480,000. the
at the option of the holder, and anti-dilution protection. the timing and manner in which the net operating loss carryforwards
holders of Series A and Series B vote with the holders of the can be utilized in any year by C2B may be limited by the Code.
Common Stock as if they were a single class. in addition, the
C2B has two stock option plans for employees. none of the
holders of Series A and Series B have special voting rights relating
options are held by employees of the AiCpA. there have been no
to the creation of more senior preferred stock.
grants since 2003 and the only activity has been cancellations after
During the year ended July 31, 2010, four stockholders of Series B employee terminations. Since there were no grant awards issued
elected to convert a total of 2,046,170 shares into an equal in 2010 or 2009, there was no compensation cost recognized in
number of Common Stock, thereby reducing the preferred stock the financial statements for the years ended July 31, 2010 or 2009.
of C2B by $10,456,000. During the year ended July 31, 2009, a outstanding options, if all were to be exercised, would dilute
Series A stockholder elected to convert its 5,867,600 shares into the existing holders of C2B voting stock in the aggregate by
an equal number of shares of Common Stock, thereby reducing approximately 2%. if exercised, the options would become C2B
the preferred stock of C2B by $25,000,000. the Common Stock Common Stock and be classified as minority interest in the
resulting from the Series A conversion was donated to the accompanying financial statements.
foundation and recorded at fair market value and has been
As of July 31, 2010 and 2009, there were 1,485,555 and 1,494,204
eliminated in consolidation.
options outstanding and exercisable, with exercise prices ranging
As of July 31, 2010, the AiCpA and the foundation control from $.38 per share to $5.11 per share.
approximately 72% of C2B’s voting rights. in accordance with
C2B’s amended shareholder agreement, the AiCpA’s voting
percentage will exceed 50% in perpetuity, subject to the AiCpA’s
approval to a transaction in which additional shares are issued to
an investor. notwithstanding the AiCpA’s controlling interest in
C2B, the AiCpA does not guarantee any of the obligations nor
is it responsible for any of C2B’s liabilities. As of July 31, 2010,
the primary source of funding for C2B has been the preferred
stockholders and its own net income; the AiCpA has only paid a
de minimus amount of cash for its stock.

the AiCpA has a note receivable from C2B, which is fully

collateralized by C2B’s website, bears an 8% interest rate and is
due on December 31, 2014. under the terms of the note, interest
is paid monthly beginning in July 2005. the principal balance
of the note of $4,344,000 and related accrued interest for the
periods prior to fiscal 2005 of $1,072,000 have been eliminated
in consolidation.

At July 31, 2010, C2B has deferred tax assets of approximately

$39,322,000 which arise primarily from net operating loss
carryforwards for federal income tax purposes of approximately
$89,982,000 expiring through 2020 and certain other temporary
differences. included in these net operating losses are
pre-acquisition losses of approximately $23,700,000, which
are subject to annual limitations. Due to the uncertainty of the
realization of the deferred tax assets, substantially a full valuation
allowance has been provided. the deferred tax asset at

09-10 AnnuAL RepoRt 57

 NOTE 11. PREFERRED STOCk AND NET ASSETS:

preferred stock and net assets and changes therein for the years ended July 31, 2010 and 2009 follow:

Balance, Balance, Balance,

August 1, increase July 31, Increase July 31,
2008 (Decrease) 2009 (Decrease) 2010
($000)
preferred stock of C2B $ 83,657 $ (25,000) $ 58,657 $ (10,456) $ 48,201
net assets:
unrestricted:
AiCpA 28,360 (22,675) 5,685 15,188 20,873
C2B (77,131) 24,394 (52,737) 11,473 (41,264)
ARA 439 – 439 2 441
Benevolent fund 6,169 (472) 5,697 518 6,215
foundation 3,204 25 3,229 266 3,495
(38,959) 1,272 (37,687) 27,447 (10,240)
temporarily restricted:
foundation 1,721 6,789 8,510 1,232 9,742
permanently restricted:
foundation 648 – 648 – 648
total net assets (36,590) 8,061 (28,529) 28,679 150
total preferred stock and net assets $ 47,067 $ (16,939) $ 30,128 $ 18,223 $ 48,351

temporarily restricted net assets are subject to donor-imposed stipulations that can be met either by actions of the foundation and/or the
passage of time.

temporarily restricted net assets consist of accounting education and research initiatives as follows:

2010 2009
($000)
John L. Carey scholarships $ 437 $ 484
Accounting Doctoral Scholars (ADS) 9,293 8,025
Library support 12 1
$ 9,742 $ 8,510

Based on indications of support through its ADS program, the foundation expects to receive approximately $17 million from CpA firms,
state CpA societies and other organizations over the course of the program to increase the production of accounting ph.D.s in existing
doctoral programs. the foundation finalizes the indications of support by obtaining executed pledge agreements.

58 A i C pA : f i n A n C i A L S
included in contributions receivable are unconditional promises to the library support fund represents income earned on the library
give pertaining to the ADS program. Amounts due in future periods, endowment principal and temporarily restricted for the support
based on executed pledge agreements received, are as follows: of the AiCpA library maintained and operated by the university
of Mississippi. per current spending policy, the foundation is
2010
committed each year to spend no greater than the fund balance
($000)
of the library support fund.
Less than one year $ 2,017
the foundation includes net investment income, which is
one to five years 5,710
comprised of interest and dividends and realized and unrealized
7,727
gains and losses, on its permanently restricted library fund as part
Discount (469) of temporarily restricted net assets. At July 31, 2010 and 2009, the
7,258 foundation had permanently restricted net assets of $648,384. for
provision for doubtful accounts (50) the year ended July 31, 2010, the permanently restricted library fund
generated a net investment gain of $28,087 and for the year ended
$ 7,208
July 31, 2009, the permanently restricted library fund generated
a net investment loss of $1,351 and included such in temporarily
for the years ended July 31, 2010 and 2009, contributions receivable restricted net assets.
are recorded at the full amount and discounted using discount rates
of 1.43% and 1.40%. the temporarily restricted library support fund had net assets of
$1,077 at July 31, 2009. for the year ended July 31, 2010, the library
the foundation monitors and evaluates contributions receivable support fund generated combined contribution revenue and
and establishes a provision for doubtful accounts based on a investment gain of $31,081, and had a use of funds of $20,000.
history of past write-offs and collections and current credit At July 31, 2010, this temporarily restricted fund had a balance
considerations. As of July 31, 2009, the foundation did not believe of $12,158.
that significant credit risk existed and no provision for doubtful
accounts was recorded. NOTE 12. ARA:

permanently restricted net assets are subject to donor-imposed the ARA’s mission is to provide funds for studies and research in
stipulations that they be maintained permanently by the regard to principles and standards of the accounting profession.
foundation. through 2002, the ARA made annual best efforts commitments
to raise funds for the financial Accounting foundation (fAf) to
the foundation’s permanently restricted net assets represent a support the work of the financial and Governmental Accounting
permanent endowment fund created to support the AiCpA library, Standards Boards from sources within the accounting profession.
the income of which is temporarily restricted. effective with the passage of the Sarbanes-oxley Act on
the foundation has investment and spending policies for its library July 30, 2002, the funding of the fASB is provided through
endowment fund that attempt to provide a predictable stream of payments by Securities and exchange Commission (SeC)
funding for the program supported by the endowment while registrants. the ARA did not fund any research during the years
seeking to maintain the purchasing power of the endowment ended July 31, 2010 and 2009.
assets. the foundation’s spending and investment policies work ARA’s Board of trustees continues to explore additional
together to achieve this objective. the foundation’s endowment opportunities to fulfill its mission.
assets are commingled in a diversified portfolio of equity and fixed
income securities in order to provide for growth with a moderate
level of volatility.

09-10 AnnuAL RepoRt 59

 NOTE 13. OThER RELATED PARTy TRANSACTIONS:

the AiCpA provides general and administrative services for the American institute of Certified public Accountants insurance trust (trust).
the AiCpA received net revenue of $3,727,000 and $3,624,000 from the trust for the years ended July 31, 2010 and 2009.

NOTE 14. RELOCATION OF CERTAIN OPERATIONS:

in october 2005, the AiCpA’s management team submitted a plan that was approved by the AiCpA’s Board of Directors and Council to
relocate a substantial portion of its Jersey City operations to Durham, north Carolina in order to manage its cost structure and budget
in the most effective way. the implementation of the relocation plan began in August 2006 and was completed by July 2007.

the following table describes the changes to the accrued relocation expenses in the statement of financial position for the years ended
July 31, 2010 and 2009:

Accrued Adjustments Accrued

Relocation to Accrued Relocation
Expenses Relocation Cash Expenses
July 31, 2008 Expenses Payments July 31, 2009
($000)
present value of remaining lease payments, net $9,198 $1,535 $(3,171) $7,562

Accrued Adjustments Accrued

Relocation to Accrued Relocation
Expenses Relocation Cash Expenses
July 31, 2009 Expenses Payments July 31, 2010
($000)

present value of remaining lease payments, net $7,562 $1,148 $(3,453) $5,257

Due to current market conditions, management was unable to secure a subtenant for the remaining space during 2010. After considering
information provided by the AiCpA’s real estate consultants, management reassessed its estimate of probable costs and the sublease
timeline associated with the remaining space, which continues to be actively marketed.

60 A i C pA : f i n A n C i A L S
 Faces of the AICPA on the cover

Peter Berlant Annette Stalker

Member since October 1982 Member since October 2007
Partner — Anchin, Block & Anchin, LLP Director — Ueltzen & Company, LLP

Mary Bernard Ronald Thompkins

Member since April 1987 Member since May 1975
Director of State and Local Taxes — Kahn, Partner — Watson Rice LLP
Litwin, Renza, & Co., Ltd.
Kemberley Washington
Byron Patrick 2010 Leadership Academy participant
Member since February 2003 Instructor — Dillard University
CEO — Simplified Innovations, Inc.
Cheryl K. Woods
Donny Shimamoto Member since June 1979
Member since June 2005 Sole Practitioner — Cheryl K. Woods CPA, P.C.
Managing Director —
IntrapriseTechKnowlogies LLC

American Institute of Certified Public Accountants

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