We continued our Celebrating 40 Years of Excellence! Webinar Series with a webinar focusing on giving a Construction Industry Technical Update, presented by Michael Hoffner, Partner; David Blain, Principal; and Lisa White, Senior Manager with McKonly & Asbury. We focused on recent accounting and tax changes impacting the construction industry and also covered upcoming accounting guidance changes with revenue recognition and other related topics. We then provided guidance to new federal and state tax legislation that will impact contractors. Check out our Upcoming Events page for news and updates on our future seminars and webinars at http://www.macpas.com/events/. View a full recap of this webinar at http://www.macpas.com/mckonly-asburys-free-construction-industry-technical-update-webinar.

1. CONSTRUCTION
INDUSTRY TECHNICAL
UPDATE
D A V I D B L A I N
L I S A W H I T E , C PA
M I C H A E L H O F F N E R , C PA

2. FRAUD ENGAGEMENT
FROM A TO Z
S A M U E L B O W E R C R A F T , M S I S , C I S A
&
D A V I D H A M M A R B E R G ,
C P A , C F E , C I S S P , M C S E , W X Y Z

4. CONSTRUCTION
INDUSTRY TECHNICAL
UPDATE
D A V I D B L A I N
L I S A W H I T E , C PA
M I C H A E L H O F F N E R , C PA

5. David Blain
• Principal
• Assurance & Advisory
• Construction
• Manufacturing
MEET THE PRESENTERS
Lisa White
• Senior Manager
• Tax
• Construction
• Real Estate
Michael Hoffner
• Partner
• Assurance & Advisory
• Construction
• Manufacturing
• Quality Control

6. CONSTRUCTION
ECONOMIC TRENDS
S
DAVID BLAIN

7. KEY ECONOMIC INDICATORS
• Confindex Quarterly Reading
• Architecture Billing Index (ABI)
• FMI Construction Outlook Report
• ENR Construction Industry Confidence Index
• Associated Builders and Contractors Construction Backlog
Indicator (CBI)

8. MACRO INDUSTRY ANALYSIS
• Each economic indicator has varying results
• Overall, the mood and climate for the construction industry appears
to be moving in a positive direction
• Results do appear to vary by industry and region of the country
• Long-term outlook for the construction industry continues to show
slow and steady growth through 2014 and into 2015.

9. CONFINDEX QUARTERLY READING
• CONFINDEX is a leading economic indicator of the health of
commercial construction in the US.
• CONFINDEX is CFMA's proprietary confidence index survey of CFOs in
the commercial construction sector.
• Survey consist of 300 randomly selected CFMA General Members
with the title of CFO in commercial construction companies

10. • The overall CONFINDEX fell 0.8% during
the second quarter from 129 to 128
• The index is up 3.2% from a year ago
• Results are consistent with expectations
for continued gradual construction
industry recovery
CONFINDEX QUARTERLY READING, CONT.

11. ARCHITECTURE BILLING INDEX (ABI)
• The Architecture Billing Index (ABI) is produced by The American Institute of
Architects (AIA)
• The ABI is an economic indicator that reflects the approximate nine to twelve
month lag time between architecture billings and construction spending
• The monthly ABI index scores are centered around 50, with scores above 50
indicating an aggregate increase in billings, and scores below 50 indicating a
decline in billings

12. • ABI continues in growth mode
• June ABI score was 51.6, down from a
mark of 52.9 in May
• The new projects inquiry index was
62.6, up sharply from the reading of
59.1 the previous month
• Sector index breakdown
• Commercial / Industrial (54.7)
• Multi-Family Residential (54.0)
• Mixed Practice (52.4)
• Institutional (51.8)
ARCHITECTURE BILLING INDEX, CONT.

13. FMI CONSTRUCTION OUTLOOK REPORT
• FMI is the largest provider of management consulting and
investment banking services to the engineering and
construction industry
• The report details Construction Put In Place (CPIP) in
three residential building, 11 nonresidential building and
five non-building structure categories.

14. FMI CONSTRUCTION OUTLOOK REPORT, CONT.
• Annual CPIP predictions Shrink to $913 billion from $918
billion in Q1 2013.
• Although prediction is down from Q1 2013, overall
growth is 7% from 2012.
• FMI does expect growth to return to 8% growth in 2014
with annual CPIP reaching $989 billion

15. ENR CONSTRUCTION INDUSTRY CONFIDENCE INDEX (CICI)
• The CICI measures executive sentiment about the current market and
reflects their views on where it will be in the next three to six months
and over a 12- to 18-month period.
• The index is based on responses to surveys sent out to more than
3,000 U.S. firms on ENR's lists of the leading contractors,
subcontractors and design firms.
• The latest results are based on a survey conducted from May 30 to
June 10.

16. • The second-quarter 2013 CICI rose to a
record 69 points on a scale of 100, which
represents a growing market.
• Virtually all the market sectors measured by
the CICI are now in growth mode.
• For the first time, all market sectors had a
CICI rating over 50, indicating expected
market growth over the next 18 months.
ENR CONSTRUCTION INDUSTRY CONFIDENCE INDEX (CICI), CONT.

17. ASSOCIATED BUILDERS AND CONTRACTORS
CONSTRUCTION BACKLOG INDICATOR (CBI)
• CBI is a forward-looking national economic indicator that reflects the amount
of work that will be performed by commercial and industrial contractors in
the months ahead
• Focused on the U.S. commercial and institutional, industrial, and
infrastructure construction industries.
• CBI is measured in months and reflects the amount of commercial and
industrial construction work under contract, but not yet completed

18. • CBI declined 1.1 percent during the first
quarter of 2013 and now stands at 7.9
months.
• CBI is still 7 percent higher compared to
one year ago.
• Infrastructure continues to be associated
with the lengthiest construction backlog.
ASSOCIATED BUILDERS AND CONTRACTORS
CONSTRUCTION BACKLOG INDICATOR (CBI)

19. TAX UPDATE
S
LISA WHITE, CPA

20. ORDINARY INCOME RATES
Tax Brackets from the Bush tax cut made permanent:
• 10%, 15%, 25%, 28%, 33%, and 35%
Added 39.6% beginning in 2013 – thresholds are:
• $450,000 for married-filing-jointly and surviving spouses
• $425,000 for head-of-households
• $400,000 for singles
• $225,000 for married-filing-separately

21. CAPITAL GAIN AND QUALIFIED DIVIDEND RATES
Beginning in 2013
• Two lowest tax brackets (10% and 15%) pay 0%
• Those in the 25% - 35% bracket pay 15%
• Those in the highest bracket (39.6%) pay 20%
• NOTE – these rates do not include the 3.8% surtax

22. FIXED ASSETS & DEPRECIATION
Section 168(k) “Bonus” Depreciation Extended for a Year
• 50% of qualifying assets
• Auto limit increased by $8,000
• Bonus depreciation *not* required to be included in percentage-complete
calculation for property with recovery period of seven years or less
• 2010 Bonus Depreciation excluded
• 2011 Bonus Depreciation included
• 2012 Bonus Depreciation included
• 2013 Bonus Depreciation excluded

23. FIXED ASSETS & DEPRECIATION (CONT.)
Section 179 Deduction extended for a year
• Maximum deduction - $500,000, with phase-out limit of $2 million
• Beginning in 2014, maximum deduction reverts back to $25,000/$200,000
Qualified leasehold improvements, qualified restaurant property, and qualified retail
space improvements, favorable treatment extended for a year
• 15 year straight-line depreciation
• Eligible for “Bonus” depreciation
• Section 179 deduction of $250,000

24. BUSINESS TAX CREDITS
New Markets Tax Credits (NMTC) extended through 2013
• $3.5 billion in funds to be awarded for 2012 and 2013
• 39% Credit of the original investment amount earned over a seven-year period
• 5% for first three years; 6% for remaining four years Low-Income Community Eligibility Listing
• Listing of Certified CDEs (as of August 2012) and Eligible Locale Listing
• http://www.novoco.com/new_markets/resource_files/cde/cde_bystate_080212.pdf
• http://www.cdfifund.gov/what_we_do/acs/update-census-data.asp
• View our website recap article for links

25. BUSINESS TAX CREDITS (CONT.)
Research & Development (R&D) Credit Extended Through 2013
• 20% Credit on the sum of the net qualified research expenses, basic research payments, and
expenses related to an energy research consortium for energy research.
Rehabilitation Investment Credit
• 10% Credit on the basis in the qualified rehabilitated building – 20% if building is a certified
historical structure.
Low-Income Housing Credit
• 9% Rehabilitation tax credit rate for allocations during 2013.

26. BUSINESS TAX CREDITS (CONT.)
Energy Credits
• 10% Credit on the basis of the energy property (geothermal and combined heat and power
system property) – 30% for solar
Work Opportunity Credit extended through 2013
• 40% of qualified first-year wages (up to $6,000 per employee) for certified workers who work at
least 400 hours; 25% for certified workers who work at least 120 hours
• Qualified veterans: cap on qualified first-year wages increases to 12,000 – 24,000.
• Summer employees: max credit: 1,200 per employee (40% of 3,000 cap on wages)

27. OTHER ITEMS
Shortened built-in gains holding period extended for a year
• Reverts back to 10-year holding period
Repair vs. Capitalization, new regulations begin in 2014
• Unit of property
• De minimis / materials and supplies
• Write-off structual components as they are replaced
• Change in accounting method

28. AFFORDABLE CARE ACT – THE 2013 IMPACT
Applies to Individuals, Estates, and Trusts
Thresholds, AGI greater than:
• $250,000 married-filing-jointly
• $125,000 married-filing-separately
• $200,000 all others
Could be subject to both taxes, but not on the same income

29. AFFORDABLE CARE ACT – THE 2013 IMPACT (CONT.)
3.8% Net Investment Income Tax (Form 8960)
• Net investment income:
• Interest, dividends, annuities, royalties, rents, and capital gains.
• “… unless those items are derived in the ordinary course of a trade or business…”
Additional 0.9% Medicare Tax:
• Note: Employers must withhold additional tax from wages in excess of $200,000,
without regard to person’s filing status.

30. ACCOUNTING TECHNICAL
UPDATE
S
MICHAEL HOFFNER, CPA

31. TECHNICAL UPDATE
ASU 2013-02 Comprehensive Income
• Requires reporting of amounts reclassified OUT of AOCI
• Effective for nonpublic entities fiscal years beginning after 12/15/2013
ASU 2013-07 Presentation of Financial Statements
• Clarifies when an entity should apply the liquidation basis of accounting, and
provides guidance on recognition and measurement of assets and liabilities under
this basis
• Effective for periods beginning after 12/15/2013

32. TECHNICAL UPDATE
ASU 2012-02 Intangibles – Goodwill and Other
• Allows an entity to make a qualitative assessment regarding whether an
indefinite-lived intangible may be impaired before determining fair value
• Effective for impairment tests performed for fiscal years beginning after
9/15/2012
NOTE: Many others issued in 2012/2013 – previous only highlights 3
believed more relevant to audience

33. TECHNICAL UPDATE | PROPOSED ASU – LEASES
Revisions
• Revised proposed ASU issued May 16th, 2013, revising the 2010 exposure draft to
reflect many of the comments and concerns heard
Many changes from the 2010 exposure draft, including:
• Dual model for lessees and lessors
• Higher threshold for consideration of extension options
• Simplified consideration of variable lease payments
• New concepts to consider in determining of a contract contains a lease

34. TECHNICAL UPDATE | PROPOSED ASU – LEASES
(continued)
Significant considerations
• Lessees will need to recognize assets and liabilities, other than certain short-term leases,
on the balance sheet. Like previous draft, the lessee records a lease liability and a right-
of-use asset.
• Exposure Draft contains guidance on calculating the initial lease liability and right-of-use
asset
• Accounting by lessor dependant on whether the lessee is expected to consume “more
than an insignificant portion” of the economic benefits embedded in the underlying asset

35. TECHNICAL UPDATE | PROPOSED ASU – LEASES
(continued)
Guidance
• All guidance will need applied to all leases existing as of the beginning of the earliest
comparative period presented.
Final Standard
• Final standard expected in 2014, effective date at least 3 years out from the final
standard.

36. TECHNICAL UPDATE | PROPOSED ASU – REVENUE RECOGNITION
Revenue Recognition Update
• Final standard expected Q3 2013 (finally!)
• After redeliberations in late 2012 and early 2013, many original decisions affirmed,
however several changes in areas related to construction. Most of these areas are
considered improved for the industry
• Overall, expectation that new model will yield similar results as current model for
many contracts

37. TECHNICAL UPDATE | PROPOSED ASU – REVENUE RECOGNITION
(continued)
Summary of Key Changes Impacting Construction
• Bad Debt – impairments from customer receivables should be an expense on the
statement of comprehensive income
• Uninstalled Materials – final standard will include language to assist in determining
how uninstalled materials will impact cost-to-cost calculations
• Variable Consideration (claims, etc) – revenue only recognized up to the amount
that should not be subject to future reversals

38. TECHNICAL UPDATE | PROPOSED ASU – REVENUE RECOGNITION
(continued)
Summary of Key Changes Impacting Construction
• Loss Provisions – existing guidance will be retained
• Effective Date – effective for annual reporting periods BEGINNING on or after
1/1/2018 for nonpublic entities
• Transition method:
• Retrospective basis, or
• Practical expedient approach wherein a cumulative effect to opening retaining earnings will
“catch up” all existing contracts rather than restating comparative years

39. TECHNICAL UPDATE | PROPOSED ASU – REVENUE RECOGNITION
(continued)
Steps in Proposed/Expected Model
• Identify the contract with a customer
• Identify separate performance obligations in the contract
• Determine the transaction price
• Allocate transaction price to separate performance obligations
• Recognize revenue when (as) the performance obligation is satisfied

40. TECHNICAL UPDATE
Private Company Accounting
• AICPA issued Financial Reporting Framework for Small and Medium Sized Entities
• Special purpose framework for entities NOT required to follow GAAP (an Other
Comprehensive Basis)
• FASB issued 3 exposure drafts related to Private Company Council on specific
alternatives to current GAAP
• Basic interest rate swaps, recognizing and measuring intangible assets other than goodwill,
and subsequent measurement of goodwill (comments due this month)

43. FRAUD ENGAGEMENT
FROM A TO Z
S A M U E L B O W E R C R A F T , M S I S , C I S A
&
D A V I D H A M M A R B E R G ,
C P A , C F E , C I S S P , M C S E , W X Y Z