BY MICHAEL R. WOOD
Over the past decade, states have accelerated their efforts to enforce UP laws, mostly
driven by their need to stem the tide of rising
deficits. Many states use third-party auditors
who are paid a percentage of what they find
in companies that have not been properly
complying with UP reporting laws. Today,
states are holding over $35 billion dollars of
reported UP, of which less than half is ever
returned to the rightful owners. But that is
just the tip of the UP iceberg, because states
are also implementing changes to existing
UP laws, reducing the dormancy periods and
adding new types of property to be tracked
and reported. In short, they are stepping up
their efforts to capture more monies.
So how does this impact accounting professionals? Simply being knowledgeable of
UP management and reporting requirements
positions them to help clients improve their
compliance practices and their visibility over
ongoing UP liabilities, avoid costly audit assessments (including interest and penalties),
and improve customer relationships.
Even if the liabilities are not material (on an
annual basis) to client financial statements,
they can be substantially material to cash
flow and cash management requirements, as
first-time report filers may not have the funds
needed to pay the liabilities that have accumulated over the past ten or even 25 years.
How can unpaid liabilities go back so far?
The answer is simple: There is no statute of
limitations on UP liabilities. Plus, like income
tax laws, the burden of proof to mitigate liabilities falls upon the “holder” of the property: the company. Just those two facts alone
make it easy to see how being out of compli-
States aim to claim the unclaimed
Despite tens of billions of dollars in abandoned property that
has been reported to states, businesses and, yes, CPAs contin-
ue to struggle with the many complexities related to unclaimed
property. Believe it or not, it is estimated that less than 25 per-
cent of companies in the United States are in full compliance
with UP reporting laws.
Improving compliance with unclaimed property laws
Michael Wood, CPA, is an IT and process
improvement specialist at Keane, a con-sultancy specializing in unclaimed property
reporting and compliance solutions.
ance could be devastating to a business.
CPAs can provide a valuable service to
their clients by taking time to learn the basics
about UP so they can help their clients:
Identify “at-risk” property (unreported
Implement oversight and operational
procedures and systems to track and manage potential UP;
Implement “due diligence” processes to
find owners (customer, vendors, employees,
etc.) of dormant property; and,
Implement compliance reporting pro-
The first step in helping client companies
improve their UP governance and compli-
ance practices is to quantify the value of “at-
risk” property. “At-risk” property is third-par-
ty (owner) property held by an organization
(the holder) that, due to its age, is considered
dormant under UP regulations and thus, if
the owner cannot be located, must be turned
over to the proper state. This effort to quantify
“at-risk” property includes a review of:
Existing policies, procedures and systems
used to track, manage and report UP;
Prior report submissions; and,
Acquisitions of other companies.
The goal of these reviews is threefold:
1. To quantify the potential UP liability;
2. To identify deficiencies in current policies, practices and systems; and,
3. To provide a roadmap for resolving those
Once this effort is complete, the company
is ready to take the next steps needed to become compliant with UP regulations.
In some cases, where compliance report-
ing has been non-existent or woefully inad-
equate, the company may find it beneficial
to approach states in order to enter into “vol-
untary disclosure agreements.” VDAs allow
the company to become proactive in its com-
pliance efforts by committing to implement
proper reporting practices. The benefits to
the company are numerous, including:
Limiting of “reach-back” for unclaimed
property to 10 years;
AICPA SPOTLIGHTS LATEST
The American Institute of CPAs has
included the latest guidance from the
Financial Accounting Standards Board
on accounting for mergers and acquisitions in the newest edition of its book
Accounting Trends & Techniques. The
reference helps preparers, management
accountants and auditors incorporate
new and existing accounting and reporting guidance into financial statements.
Global M&A volume totaled $716.3
billion in the first quarter of 2011. It is expected to reach $3.04 trillion in 2011, the
most activity in five years, according to
a recent report by Thomson Reuters and
Freeman Consulting Services. Accountants preparing financials for companies
involved in these deals need to understand the requirements of SFAS No. 141R
(FASB ASC 805), Business Combinations.
The standard recently introduced
the acquisition method of accounting
to achieve better comparability of the
information about business combinations
provided in financial reports.
Accounting Trends & Techniques, now
in its 64th edition, surveys 500 public
companies for illustrative examples from
actual financial statements and annual
reports from a wide range of companies.
The book costs $135 for AICPA members
or $168.75 for non-members.
NEW YORK — The International Accounting
Education Standards Board has proposed
changes in its ethics standards to provide
for learning and development activities in
professional values and ethics for accountants throughout their careers.
The IAESB, which operates under the
auspices of the International Federation
of Accountants, released a proposed
revision of International Education Standard 4, Professional Values, Ethics and
Attitudes. In addition to a formal program assessment and a learning outcome
approach, the IAESB also proposes a requirement for reflective activity — where
accountants and students document
experiences relating to lessons learned
from ethical dilemmas and situations.