To an outsider, the business of accounting may seem timeless. There’s a sense that this is a profession that values hard work and tradition as much as accuracy.

But there’s another side of accounting that’s much more dynamic — dare we say ... trendy.

“Accounting principles and rules are continuously changing to keep up with the times,” says Tim Downard, audit partner in the Cincinnati office of Grant Thornton LLP.“As business practices evolve, so does the accounting guidance in order to keep pace. The past six months to one year have been a very active rule-making period for the Financial Accounting Standards Board (FASB) and other governing bodies.”

Downard, as well as Richard Daeschner, audit principal at Cincinnati’s Rippe & Kingston CO PSC and Kelly Postlewaite, a CPA and manager at BKD LLC, say there are a few things about new accounting standards that Tristate businesses should know.

SFAS 141R

A revised Statement of Financial Accounting Standards No. 141(R), Business Combinations, which affects mergers and acquisitions accounting, was issued. This is effective for fiscal years beginning after Dec. 15, 2008, but smart businesses should plan now for the new standards.

“SFAS 141R significantly changes the way companies account for business combinations,” Downard says.

Daeschner says the new standards have a similar goal as the 2002 memorandum of understanding between the FASB and the International Accounting Standards Board. That memorandum was designed to eliminate the differences between generally accepted accounting standards in the United States and the International Financial Reporting Standards. Similarly, U.S. and global mergers and acquisitions accounting will be playing by the same rules, thanks to SFAS 141R.

The new standard will generally require assets acquired and liabilities assumed to be measured at their acquisition-date fair value. Acquisition expenses must now be expensed. Legal fees and other transaction-related costs are expensed as incurred, and are no longer included as a cost of acquiring the business.

SFAS 141R also requires acquirers to estimate the acquisition-date fair value of any contingent consideration, and to recognize any subsequent changes in that fair value in earnings. Previously, these contingencies typically were not recorded. In addition, restructuring costs that the acquirer expects, but is not obligated to incur, post-acquisition will now be recognized separately from the business acquisition.

Under the new standard, research and development costs that are in process will be recorded as an intangible asset on the balance sheet. In the past, these costs were assigned a value and expensed on the income statement. Also, the notes to the financial statements will include significant disclosures regarding the transaction.

Daeschner says the changes should result in more consistent accounting for business combinations.In addition, acquirers will be more careful, thanks to the increased oversight. It’s never good to look like you just paid $4 million for a company that was really only worth $1 million.

SFAS 157

The FASB issued SFAS No. 157, Fair Value Measurements, which defines fair value and emphasizes it as a market-based measurement.The standard creates a GAAP framework for measuring fair value and requires expanded disclosures in financial statements them.

SFAS 157 is effective for financial statements issued for fiscal years beginning after Nov. 15, 2007, and for interim periods within those fiscal years. Early adoption is encouraged (as of the beginning of an entity’s fiscal year) in a year for which companies have not yet issued any financial statements, including interim financial statements. An amendment issued in February 2008 defers the effective date of SFAS 157 for certain non-financial assets and non-financial liabilities to fiscal years beginning after Nov. 15, 2008, and interim periods in those fiscal years.

SFAS 160

This new standard pertains to Non-controlling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 (SFAS 160).SFAS 160 requires all entities to report non-controlling interests in subsidiaries as a separate component of equity in the consolidated financial statements, versus as a minority interest, as historically reported.SFAS 160 establishes a single method of accounting for changes in a parent’s ownership interest in a subsidiary that do not result in deconsolidation.

Companies will no longer recognize a gain or loss on partial disposals of a subsidiary where control is retained. In addition, in partial acquisitions where control is obtained, the acquiring company will recognize and measure at fair value 100 percent of the assets and liabilities, including goodwill, as if the entire target company had been acquired. SFAS 160 is effective for fiscal years beginning after Dec. 15, 2008, and early adoption is not permitted.

In the not-for-profit sector, things are changing, too. Most not-for-profit organizations are aware that, thanks to the IRS’s commitment to transparency and compliance, Form 990 was revised for the 2008 tax year. The IRS emphasized it wants to reduce the burden on filing organizations, but that’s debatable because the new Form 990 contains 11 parts, says Postlewaite of BKD LLP in Cincinnati. There also are 16 schedules that must be completed, if applicable to the organization.

Many of these 16 new schedules ask for information that was required in the old Form 990, but in greater detail, she says. The remainder ask about areas such as tax-exempt bond issues, hospitals, foreign activity and non-cash contributions.

Perhaps the most controversial area of the new 990 asks about an organization’s governance, management and disclosure, Postlewaite says. This section asks about an organization’s policies. The information is not required by Internal Revenue Code, she explains, but an agency needs to consider how the community and the IRS will perceive them if it doesn’t supply answers. Form 990s are, of course, open to public scrutiny.

Additionally, agencies should consider how to adjust their accounting records to make sure required data is available when the year ends. Proving that even the feds have a heart for charity, some small not-for-profits get a break here. They can take advantage of a transition period and file a simpler Form 990-EZ. Also, most of the more complex schedules H (for hospitals) and K (for tax-exempt bonds) are optional for 2008, with full reporting on these schedules required for 2009, Postlewaite says.

Another important bit of news for not-for-profits: Beginning in 2009, 403(b) plans will have the same filing requirements (Form 5500) and auditing requirements as for-profit employers with 401(k) plans. Now that the IRS and the Department of Labor have spent years scrutinizing compliance of for-profit 401(k)s, they’re ready to show not-for-profits the same (unwanted?) attention.

Smaller agencies needn’t worry. In general, only a 403(b) plan with 100 or more participants will be affected by this change. The audit will require information from 2008 as well as 2009, so now is the time to discuss the necessary reports with the custodian of the plan’s investments.

Leaders of businesses of all sizes should educate themselves about changes to accounting standards and practices. Respected accounting firms such as Rippe & Kingston, Grant Thornton and BKD place a priority on making sure individuals and clients are informed about anything that may affect their finances.

“The pace of change has increased in recent years as a result of moving to reporting on a fair value basis and more complicated financial transactions,” says Rippe & Kingston’s Daeschner. “We send out monthly e-newsletters to keep our clients informed on the latest accounting and business news. We also meet regularly with clients to discuss how these changes affect their companies.”