CBZ » Topics » New Accounting Pronouncements

These excerpts taken from the CBZ 10-K filed Mar 17, 2008.
New Accounting Pronouncements
 
In September 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 157 “Fair Value Measurements” (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. CBIZ does not expect the adoption of SFAS No. 157 will have a material impact on the consolidated financial statements.
 
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115” (“SFAS No. 159”). SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are currently not required to be measured at fair value. SFAS No. 159 is effective January 1, 2008. CBIZ does not expect the adoption of SFAS No. 159 will have a material impact on the consolidated financial statements.
 
In December 2007, the FASB issued SFAS No. 141 (revised 2007) “Business Combinations” (“SFAS No. 141R”), which replaces SFAS No. 141, “Business Combinations.” SFAS No. 141R establishes principles and requirements for how an acquirer, a) recognizes and measures the assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree, b) recognizes and measures the goodwill acquired, and c) determines what information to disclose. SFAS No. 141R also requires that all acquisition-related costs, including restructuring, be recognized separately from the acquisition, and that changes in acquired tax contingencies, including those existing at the date of adoption, be recognized in earnings if outside the maximum allocation period (generally one year). SFAS No. 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning after December 15, 2008. CBIZ is currently evaluating the impact of adoption of SFAS No. 141R on the consolidated financial statements.
 
In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements — an amendment of Accounting Research Bulletin No. 51” (“SFAS No. 160”). SFAS 160 establishes requirements for ownership interests in subsidiaries held by parties other than the Company (sometimes called “minority interests”) be clearly identified, presented, and disclosed in the consolidated statement of financial position within equity, but separate from the parent’s equity. All changes in the parent’s ownership interests are required to be accounted for consistently as equity transactions and any noncontrolling equity investments in deconsolidated subsidiaries must be measured initially at fair value. This statement is effective for CBIZ beginning January 1, 2009. CBIZ is currently evaluating the potential impact of the adoption of SFAS No. 160 on its consolidated financial statements.


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Item 7A.   Quantitative and Qualitative Disclosures about Market Risk.
 
CBIZ’s floating rate debt under its credit facility exposes the Company to interest rate risk. Interest rate risk results when the maturity or repricing intervals of interest-earning assets and interest-bearing liabilities are different. A change in the Federal Funds Rate, or the reference rate set by the Bank of America, would affect the rate at which CBIZ could borrow funds under its credit facility. CBIZ’s balance outstanding under its credit facility at December 31, 2007 was $30.0 million. If market rates were to increase or decrease 100 basis points from the levels at December 31, 2007, interest expense would increase or decrease approximately $0.3 million annually.
 
CBIZ does not engage in trading market risk sensitive instruments. CBIZ has used interest rate swaps to manage the interest rate mix of its credit facility and related overall cost of borrowing. Interest rate swaps involve the exchange of floating for fixed rate interest payments to effectively convert floating rate debt into fixed rate debt based on a one, three, or six-month U.S. dollar LIBOR. Interest rate swaps allow CBIZ to maintain a target range of fixed to floating rate debt. In December 2007, CBIZ entered into an arrangement effective in January 2008 to swap $10.0 million of its floating rate debt into fixed rate debt for two years to mitigate the Company’s interest rate risk. Management will continue to evaluate the potential use of interest rate swaps as it deems appropriate under certain operating and market conditions.
 
In connection with CBIZ’s payroll business, funds held for clients are segregated and invested in short-term investments, including ARS. ARS are variable debt instruments with longer stated maturities whose interest rates are reset at pre-determined short-term intervals through a Dutch auction system. CBIZ invests a portion of funds held for clients in ARS as they typically generate higher rates of return than money market investment alternatives. In accordance with our investment policy, all investments carry an investment grade rating at the time of the initial investment. As of February 29, 2008, CBIZ held $23.5 million in ARS investments.
 
The credit markets are currently experiencing uncertainty which has impacted the ARS markets primarily due to failed auctions as a result of sell orders exceeding buy orders. As of December 31, 2007, CBIZ had not experienced any failed auctions with respect to ARS held in its portfolio. However, as a result of the market conditions since December 31, 2007, CBIZ has experienced failed auctions with ARS investments during the first quarter of 2008, and one of these investments was downgraded below the minimum rating required of the Company’s investment policy. The remainder of the investments continue to carry an investment grade rating.
 
Although we have experienced some failed auctions with regards to ARS, CBIZ believes it has adequate liquidity to operate and settle client obligations as the majority of CBIZ’s client funds are invested in highly-liquid short-term money market funds.
 
Item 8.   Financial Statements and Supplementary Data.
 
The Financial Statements and Supplementary Data required hereunder are included in this Annual Report as set forth in Item 15(a) hereof.
 
Item 9.   Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
 
None.
 
Item 9A.   Controls and Procedures.
 
New
Accounting Pronouncements



 



In September 2006, the FASB issued Statement of Financial
Accounting Standards (“SFAS”) No. 157 “Fair
Value Measurements” (“SFAS No. 157”).
SFAS No. 157 defines fair value, establishes a
framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value
measurements. SFAS No. 157 is effective for fiscal
years beginning after November 15, 2007. CBIZ does not
expect the adoption of SFAS No. 157 will have a
material impact on the consolidated financial statements.


 



In February 2007, the FASB issued SFAS No. 159,
“The Fair Value Option for Financial Assets and Financial
Liabilities — Including an Amendment of FASB Statement
No. 115” (“SFAS No. 159”).
SFAS No. 159 permits entities to choose to measure
many financial instruments and certain other items at fair value
that are currently not required to be measured at fair value.
SFAS No. 159 is effective January 1, 2008. CBIZ
does not expect the adoption of SFAS No. 159 will have
a material impact on the consolidated financial statements.


 



In December 2007, the FASB issued SFAS No. 141
(revised 2007) “Business Combinations”
(“SFAS No. 141R”), which replaces
SFAS No. 141, “Business Combinations.”
SFAS No. 141R establishes principles and requirements
for how an acquirer, a) recognizes and measures the assets
acquired, the liabilities assumed, and any non-controlling
interest in the acquiree, b) recognizes and measures the
goodwill acquired, and c) determines what information to
disclose. SFAS No. 141R also requires that all
acquisition-related costs, including restructuring, be
recognized separately from the acquisition, and that changes in
acquired tax contingencies, including those existing at the date
of adoption, be recognized in earnings if outside the maximum
allocation period (generally one year). SFAS No. 141R
applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first
annual reporting period beginning after December 15, 2008.
CBIZ is currently evaluating the impact of adoption of
SFAS No. 141R on the consolidated financial statements.


 



In December 2007, the FASB issued SFAS No. 160,
“Noncontrolling Interests in Consolidated Financial
Statements — an amendment of Accounting Research
Bulletin No. 51”
(“SFAS No. 160”). SFAS 160 establishes
requirements for ownership interests in subsidiaries held by
parties other than the Company (sometimes called “minority
interests”) be clearly identified, presented, and disclosed
in the consolidated statement of financial position within
equity, but separate from the parent’s equity. All changes
in the parent’s ownership interests are required to be
accounted for consistently as equity transactions and any
noncontrolling equity investments in deconsolidated subsidiaries
must be measured initially at fair value. This statement is
effective for CBIZ beginning January 1, 2009. CBIZ is
currently evaluating the potential impact of the adoption of
SFAS No. 160 on its consolidated financial statements.





40





 


















Item 7A.  

Quantitative
and Qualitative Disclosures about Market Risk.



 



CBIZ’s floating rate debt under its credit facility exposes
the Company to interest rate risk. Interest rate risk results
when the maturity or repricing intervals of interest-earning
assets and interest-bearing liabilities are different. A change
in the Federal Funds Rate, or the reference rate set by the Bank
of America, would affect the rate at which CBIZ could borrow
funds under its credit facility. CBIZ’s balance outstanding
under its credit facility at December 31, 2007 was
$30.0 million. If market rates were to increase or decrease
100 basis points from the levels at December 31, 2007,
interest expense would increase or decrease approximately
$0.3 million annually.


 



CBIZ does not engage in trading market risk sensitive
instruments. CBIZ has used interest rate swaps to manage the
interest rate mix of its credit facility and related overall
cost of borrowing. Interest rate swaps involve the exchange of
floating for fixed rate interest payments to effectively convert
floating rate debt into fixed rate debt based on a one, three,
or six-month U.S. dollar LIBOR. Interest rate swaps allow
CBIZ to maintain a target range of fixed to floating rate debt.
In December 2007, CBIZ entered into an arrangement effective in
January 2008 to swap $10.0 million of its floating rate
debt into fixed rate debt for two years to mitigate the
Company’s interest rate risk. Management will continue to
evaluate the potential use of interest rate swaps as it deems
appropriate under certain operating and market conditions.


 



In connection with CBIZ’s payroll business, funds held for
clients are segregated and invested in short-term investments,
including ARS. ARS are variable debt instruments with longer
stated maturities whose interest rates are reset at
pre-determined short-term intervals through a Dutch auction
system. CBIZ invests a portion of funds held for clients in ARS
as they typically generate higher rates of return than money
market investment alternatives. In accordance with our
investment policy, all investments carry an investment grade
rating at the time of the initial investment. As of
February 29, 2008, CBIZ held $23.5 million in ARS
investments.


 



The credit markets are currently experiencing uncertainty which
has impacted the ARS markets primarily due to failed auctions as
a result of sell orders exceeding buy orders. As of
December 31, 2007, CBIZ had not experienced any failed
auctions with respect to ARS held in its portfolio. However, as
a result of the market conditions since December 31, 2007,
CBIZ has experienced failed auctions with ARS investments during
the first quarter of 2008, and one of these investments was
downgraded below the minimum rating required of the
Company’s investment policy. The remainder of the
investments continue to carry an investment grade rating.


 



Although we have experienced some failed auctions with regards
to ARS, CBIZ believes it has adequate liquidity to operate and
settle client obligations as the majority of CBIZ’s client
funds are invested in highly-liquid short-term money market
funds.


 















Item 8.  

Financial
Statements and Supplementary Data.



 



The Financial Statements and Supplementary Data required
hereunder are included in this Annual Report as set forth in
Item 15(a) hereof.


 















Item 9.  

Changes
in and Disagreements With Accountants on Accounting and
Financial Disclosure.



 



None.


 















Item 9A.  

Controls
and Procedures.



 




This excerpt taken from the CBZ 10-K filed Mar 16, 2007.
New Accounting Pronouncements
 
In July 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (FIN 48). FIN 48 clarifies the accounting for uncertainty in income tax positions and requires applying a “more likely than not” threshold to the recognition and derecognition of tax positions. FIN 48 is effective for fiscal years beginning after December 15, 2006. The estimated cumulative effect of adopting FIN 48 is expected to be an increase in the opening balance of retained earnings on January 1, 2007 of between $0.4 million and $0.6 million.
 
In September 2006, the FASB issued SFAS No. 157 “Fair Value Measurements.” SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. CBIZ is currently evaluating the impact of adoption of SFAS No. 157 on the consolidated financial statements.
 
In December 2006, the FASB issued Staff Position (FSP) EITF 00-19-2, “Accounting for Registration Payment Arrangements.” This FSP specifies that the contingent obligation to make future payments or otherwise transfer consideration under a registration payment arrangement, whether issued as a separate agreement or included as a provision of a financial instrument or other agreement, should be separately recognized and measured in accordance with FASB Statement No. 5, “Accounting for Contingencies.” The guidance is effective for fiscal years beginning after December 15, 2006. The adoption of EITF 00-19-2 is not expected to have a material impact on CBIZ’s consolidated financial statements.
 
Item 7A.   Quantitative and Qualitative Disclosures About Market Risk.
 
CBIZ’s floating rate debt under its credit facility exposes the Company to interest rate risk. Interest rate risk results when the maturity or repricing intervals of interest-earning assets and interest-bearing liabilities are different. A


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Table of Contents

change in the Federal Funds Rate, or the reference rate set by the Bank of America, would affect the rate at which CBIZ could borrow funds under its credit facility. Although CBIZ did not have a balance outstanding under its credit facility at December 31, 2006, CBIZ may borrow funds under its credit facility in future periods which could expose the Company to interest rate risk.
 
CBIZ does not engage in trading market risk sensitive instruments. CBIZ has used interest rate swaps to manage the interest rate mix of its credit facility and related overall cost of borrowing. Interest rate swaps involve the exchange of floating for fixed rate interest payments to effectively convert floating rate debt into fixed rate debt based on a one, three, or six-month U.S. dollar LIBOR. Interest rate swaps allow CBIZ to maintain a target range of fixed to floating rate debt. Management will continue to evaluate the potential use of interest rate swaps as it deems appropriate under certain operating and market conditions.
 
Item 8.   Financial Statements and Supplementary Data.
 
The Financial Statements and Supplementary Data required hereunder are included in this Annual Report as set forth in Item 15(a) hereof.
 
Item 9.   Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
 
None.
 
Item 9A.   Controls and Procedures.
 
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