October, 2017 | RKL LLP
Posted on: October 24th, 2017

Padden, Guerrini & Associates to Merge with RKL

Transaction capitalizes on industry synergy and geographic strength


MECHANICSBURG, PA (October 24, 2017) – RKL LLP (RKL), a leading CPA and business consulting firm, today announced that Mechanicsburg-based Padden, Guerrini & Associates, P.C. (PGA) will be joining the firm as the result of a merger effective January 1, 2018. The deal capitalizes on synergies between the firms’ client bases and further bolsters RKL’s position in the Greater Capital Region.

The transaction aligns two Central Pennsylvania-based firms with a shared focus on serving the needs of middle market commercial and individual clients based in the Greater Capital Region, as well the credit union and senior living industries. Ranked among the nation’s top firms and a “Best Place to Work in Pennsylvania,” RKL’s specialized expertise and broad-based professional services capabilities will further strengthen PGA’s respected practices and talented workforce.

“This transaction was a logical fit for both firms. From RKL’s perspective, the opportunity to merge in a team of professionals with an exemplary dedication to our key industries as well as to the Greater Capital Region is a true win for our strategic growth initiatives,” said RKL CEO Edward W. Monborne.

“Personalized attention, consistent relationships and high-quality service have long been hallmarks of PGA’s client commitment,” PGA President David Padden said. “By joining the RKL team, not only are we able to maintain these principles, but we can also tap into cutting-edge capabilities that will allow us to expand and build upon the tax, accounting and consulting services we provide to commercial and individual clients.”

The transaction enhances RKL’s position in the Greater Capital Region, growing the size of its local team to approximately 50 team members. PGA’s existing location at 91 Cumberland Parkway, Mechanicsburg will serve as RKL’s second location in the Greater Capital Region and will add a West Shore presence to the firm’s geographic footprint.

The two firms share respected positions serving the accounting and consulting needs of the credit union and senior living industries, in addition to their well-recognized market position serving middle market commercial clients. Both firms are nationally recognized as top auditors of credit unions by Callahan & Associates, with RKL occupying the top 15th spot and PGA holding the 20th position. This transaction will place RKL in the top 10 firms serving credit unions nationally. PGA’s depth of experience serving senior living providers and its medical billing practice will further enhance RKL’s Senior Living Services Consulting Group, a nationally leading provider of financial, operational and compliance services for the post-acute care industry.

PGA’s five partners and 26 team members will join the RKL team, which employs nearly 400 team members in Pennsylvania and beyond. The Mechanicsburg office will represent the sixth Pennsylvania-based location for RKL’s CPA and business consulting firm, which also has operations in Lancaster, Harrisburg, Reading, York and Allentown. The firm serves clients in all 50 states and has locations across the U.S. through its Information Technology consulting entity, RKL eSolutions.


Posted on: October 23rd, 2017

PA Supreme Court NOL Ruling Changes Deduction Moving Forward, Creates Uncertainty for Past Filings

RKL’s State and Local Tax experts recap the PA Supreme Court’s ruling on the net operating losses deduction and assess the impact on corporate taxpayers. Two years ago, the Commonwealth Court sided with corporate taxpayers in Nextel Communications of the Mid-Atlantic, Inc. v. Commonwealth of Pennsylvania, declaring unconstitutional the state’s cap on deductible net operating losses (NOL). Last week, Pennsylvania’s Supreme Court unanimously upheld the lower court’s ruling.

Tax treatment of net operating losses in Pennsylvania

The Nextel case stems from Pennsylvania’s limitation of the use of NOL by corporations. Pennsylvania’s Tax Code allows corporate taxpayers to deduct losses from one year from their state corporate net taxable income over subsequent years.

As one of several states that limits the amount of NOL that businesses are allowed to carry over, Pennsylvania caps NOL at the greater of either $5 million or 30 percent of taxable income. Other examples of state NOL treatment include New Hampshire’s $10 million cap, Utah’s $1 million cap, West Virginia’s $300,000 cap, Idaho’s $100,000 cap and Delaware’s $30,000.

Ruling’s impact and potential legislative fix

Although all nine of the Supreme Court Justices agreed that the limitation or cap on NOL deductions violated the uniformity clause of the Pennsylvania Constitution, the court’s proposed remedy is the cessation of the flat dollar amount cap and the continuation of the percentage cap (which stands at 30 percent since the last update in 2015).

Ultimately, any change to the state tax code must move through the standard legislative process. With 2017-18 Fiscal Year budget negotiations still underway in the Capitol, this could be an opportune time to address the NOL issue and provide some clarity and consistency for business taxpayers.

Around the same time of the Supreme Court Nextel ruling, Pennsylvania’s House of Representatives passed HB 542, its latest version of a revenue plan for the 2017-18 state budget. The bill would remove the NOL cap on dollar amount and would increase the percentage cap to 35 percent for taxable years after December 31, 2017, rising to 40 percent one year later.

HB 542 does not, however, bar the Pennsylvania Department of Revenue (PA DOR) from issuing assessments for open years on C corporations, which benefit from the dollar cap and represent the vast majority of business entities that took advantage of the NOL deduction.

Implications of NOL ruling remain unclear

In the absence of explicit legislative or judicial prohibition on the practice and given its recent uptick in enforcement programs, concerns remain that DOR will revisit C corporations that deducted NOL under the dollar cap amount and begin to assess tax for open years using the percentage of income limitation. This type of action could result in a reduction of the NOL and an increase in the corporate net income tax for any taxpayers who availed themselves of the dollar cap.

The full impact of the Supreme Court’s ruling and the fate of HB 542 at this time is unknown, but RKL’s state and local tax team is closely monitoring this situation as it develops. Readers who have questions or wish to discuss the potential ramifications of the Nextel ruling should contact me at 717.394.5666 or ftobias@rklcpa.com.


Frank J. Tobias, CGFM, Principal in RKL’s Tax Services Group. State and local taxes, Pennsylvania taxes, multi-state taxationContributed by Frank J. Tobias, CGFM, Principal in RKL’s Tax Services Group. He specializes in the area of multi-state planning and compliance, with extensive experience in all areas of Pennsylvania taxation.


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Posted on: October 17th, 2017

FASB Changes to Bring More Context Around Nonprofit Liquidity and Cash Flow

FASB Changes to Bring More Context Around Nonprofit Liquidity and Cash Flow The financial statements of not-for-profit organizations will soon undergo a significant transformation, courtesy of the Financial Accounting Standards Board (FASB). As part of its response to stakeholder feedback to improve usefulness and clarity for the not-for-profit reporting model, FASB published Accounting Standards Update (ASU) No. 2016-14, Presentation of Financial Statements of Not-for-Profit Entities, in August 2016. The ASU adjusts financial reporting requirements across a variety of categories to improve consistency and comprehension of the entities that rely on this data, such as grantors, donors and creditors.

This update, which is effective for fiscal years starting after December 15, 2017, contains a broad spectrum of changes. To give nonprofit leaders a better sense of what’s ahead and how they should prepare, we have been breaking out the changes by category in separate blog posts for detailed examination. Previously, we looked at the impact on investment returns and expense reporting, followed by a deep dive into the efforts to simplify net asset classification and reporting. Today, we conclude this blog series by examining how this ASU affects disclosure of liquidity and cash flows.

New disclosures on liquidity and availability of resources

ASU 2016-14 expands the quantity and quality of required information related to a nonprofit’s liquid financial resources. This additional information can help readers of the financial statements understand the limits on how, and during what time frame, the organization’s resources can be used.

In the footnotes of the financial statements, nonprofits must provide qualitative information that communicates how the organization manages its liquid resources available to meet cash needs for general expenditures within one year of the statement of financial position date. Nonprofits can choose to include the quantitative information required by this ASU either on the face of the financials or in the footnotes. Either way, this quantitative data must communicate the availability of financial assets at the statement of financial position date to meet cash needs for general expenditure within one year of the statement of financial position date.

This disclosure must also explain how net asset restrictions affect the availability of financial assets at the date of the statement of financial position to meet short-term financial obligations. Availability may be affected by the nature of the assets, internal limits imposed by the governing board or external limits imposed by donors, grantors, laws and contracts with others.

For example, an organization could comply with this new requirement by explaining in the footnotes that it maintains liquidity by managing its working capital and having available a line of credit with a bank. To support this statement, the organization could include a table (also in the footnotes or as a reference to the face of the financials) that reflects its financial assets as of the statement of financial position dates, reduced by amounts not available for general use due to contractual or donor-imposed restrictions within one year of the statement of financial position date.

Options for statement of cash flows

Nonprofits may continue to choose either the direct or indirect method to report the net amount for operating cash flows on the face of the financial statements. For nonprofits using the direct method, this ASU frees them from the requirement to disclose indirect method reconciliation for operating cash flows. This change in reporting requirement is a small but valuable simplification of data presentation.

Even though this ASU improves and streamlines nonprofit reporting, it still represents a considerable shift from current practice. Ahead of the effective date, nonprofits should invest the time to review and familiarize themselves with this update and how it will impact their current procedures.

RKL’s dedicated team of professionals serving the nonprofit sector are here to help organizations prepare for adoption. Contact Douglas L. Berman, CPA, Not-for-Profit Industry Group Leader, with any questions or for more information.

Sally E. Stewart, CPAContributed by Sally E. Stewart, CPA, Principal in RKL’s Audit Services Group. Sally provides audit services for not-for-profit organizations and government entities.





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Posted on: October 10th, 2017

Three Intangible Assets That Drive Your Company’s Value

Due to its heavy reliance on assumptions, fair value reporting has often been dismissed as an art, not a science. Thanks to expanded regulatory requirements, improved technical training and certifications for practitioners and increasingly sophisticated methodology, today’s fair value reporting is more reliable and sound than ever. What does this all mean for business owners and their management teams? Increased scrutiny and standards will only serve to improve the quality of the information provided by fair value reporting. 

Fair value reporting as long-term investment

Business owners and financial executives who are required to obtain a valuation for financial reporting purposes (fair value) should not dread this additional cost, but instead consider the information provided a useful management tool that provides insight on what drives the value of their companies. Intangible assets are often the primary contributors to a company’s earning power, allowing it to create value through revenue growth, innovation and profitability, so they should also inform business strategy and decision-making.

Customer relationships

Retaining a loyal customer base is critical to a company’s profitability. Long-standing business axioms related to customer satisfaction and retention are now backed up with data. Market research firm Forrester puts the cost of acquiring new customers five times higher than the cost to keep current ones.

Business owners who understand the relationship between customer loyalty and fair value can leverage that information into strategies to reduce attrition, drive repeat business and increase future revenue. Companies that measure and manage customer retention are making an investment that will reduce operating costs, generate referral activity and increase long-term profitability.   


Whether it is a company logo (McDonald’s golden arches) or a slogan (Nike’s “Just do it”), trademarks are important legal and social defenders of a brand identity. As a company’s brand reputation strengthens, so does the value of the trademarks that protect its design and text elements. The goodwill created by trademarked brand identifiers can be an asset in the war for talent. It can also influence buying decisions and increase the loyalty of the customer base. Respected and easily identifiable trademarks can help companies expand more easily into new products or services, and enhance marketability in the event of a sale of the business. 

Workforce in place

Many businesses boast that “our people are our best asset” for marketing and recruiting purposes, but what if it could be proven true? Valuations of the workforce in place often reveal it as one of a company’s most valuable assets. Regardless of the size of the business, the expense related to recruiting, hiring and training a replacement workforce could be significant. Having a well-trained, highly skilled employee complement in place not only drives the inherent value of a company; it is also attractive to potential buyers who would be spared the considerable expense of investing in an entirely new team.

Viewing employees collectively as an asset that drives value instead of simply another operating expense may be a change in perspective, but this mind shift could inform decisions and policies related to workforce development, training and learning opportunities, recruitment efforts, employee engagement and even compensation.

Beyond the compliance reasons, the fair value process can help business owners and their management teams gain a more comprehensive understanding of how intangible assets drive their company’s value. In a competitive economic landscape, this useful business intelligence can be deployed strategically by decision makers to support growth, expansion and competitiveness in the marketplace.

Gretchen G. Naso, CVA, MBA, Principal in RKL’s Business Consulting Services GroupContributed by Gretchen G. Naso, CVA, MBA, Principal in RKL’s Business Consulting Services Group. As a Certified Valuation Analyst, Gretchen specializes in valuations required for GAAP-based financial statement reporting including purchase price allocation and employee stock options issued as compensation. Gretchen’s valuation work often focuses on the intangible assets of a company, such as trademarks, customer relationships and intellectual property.


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