RubinBrown's Construction Services experts recently attended the National Associated General Contractors’ (AGC) Financial Issues Forum in Miami, Florida.
If you want to see a booming construction economy, just go to Miami. There were more tower cranes than you could count!
The economic update provided by Ken Simonson, AGC’s Chief Economist forecasted a 4-8% growth in nonresidential construction for 2014.
Three trends helping many sectors were shale exploration, the Panama Canal expansion and the revival of residential construction.
Three negative trends were less government spending, consumers switching to online buying and employers shrinking office space per employee.
In other related areas, projections for material costs are to increase 1-3% and labor costs to increase 2.5 to 5%.
In addition to the economic forecast, various accounting and tax issues were discussed:
- The Private Company Council (PCC) with the Financial Accounting Standards Board (FASB) issued two new exceptions to Generally Accepted Accounting Principles (GAAP). The first addresses Accounting for Goodwill and the second addresses Derivatives and Hedging. The forum felt like these Accounting Standards Updates were a positive sign that the FASB was beginning to address the concerns for private companies.
- The American Institute of Certified Public Accountants (AICPA) also issued a financial statement alternative. It is called the Financial Reporting Framework for Small and Medium Sized Entities. There were a variety of opinions on this new framework. It is still relatively unknown among the users of financial statements.
- Two potential FASB pronouncements were discussed with a FASB project manager. The revenue recognition standard is set to be issued the first quarter of 2014. At this point, there will be some effect on the construction accounting, but it is not considered to be major. The second pronouncement involves revised lease accounting. There is still quite a bit of debate over this pronouncement and the FASB representative wasn’t definitive on when the pronouncement might be issued.
- In the tax area, the new tax on investment income was discussed. There will be an additional 3.8% tax on investment income for “high-income” taxpayers. The rules surrounding this tax and all of the various issues were discussed and can be very complicated.
- The major tax issue going in to effect are the new tangible property regulations. Again, these are very complicated and involve a lot of detail information. There are some opportunities for taxpayers in this area, so this should be discussed with your tax preparer when preparing your 2013 returns.
Finally, the Financial Issues Forum and the National AGC discussed a number of issues effecting contractors and how we thought they should be addressed by Congress. The AGC staff monitor congressional activities and regularly communicate issues that might have an effect on contractors.
RubinBrown will keep up to date on activity from Washington or other accounting and tax items and let you know about issues that will impact you and your business.
Under U.S. Treasury Department guidelines, we hereby inform you that any tax advice contained in this communication is not intended or written to be used, and cannot be used by you for the purpose of avoiding penalties that may be imposed on you by the Internal Revenue Service, or for the purpose of promoting, marketing or recommending to another party any transaction or matter addressed within this tax advice. Further, RubinBrown LLP imposes no limitation on any recipient of this tax advice on the disclosure of the tax treatment or tax strategies or tax structuring described herein.
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