One Word

It is amazing what a difference one word can make in a common question to CPAs.

The first version is “how should I account for something?” This sentence implies several things. It implies that they trust you know GAAP. It implies that they believe in your integrity. Finally, it implies that they want you to take into consideration the entire process from source data to controls to determine not only the best answer under GAAP, but also the most efficient, effective and repeatable process to get that answer month after month.

The second version is “how can I account for something?” This sentence takes us in a whole different direction. They are asking for options under GAAP. This will not only test the bounds of your knowledge, but the bounds of your integrity as well. It also implies that they are not asking for your input on the process or controls – only on researching possibilities under GAAP. This question is limiting and potentially dangerous at the same time.

So which question does your boss ask?

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The Profession’s Problem with Parents

While the profession still has a lot of work to do to get women into leadership positions, at least they have a pipeline full of women candidates for leadership all the way back to those choosing accounting as their major in college. Unfortunately the same can’t be said about other diversity groups like African-Americans and Hispanics. Those two groups make up 30% of the population in the U.S today, but only 10% of the new accounting hires in 2011-2012 (the last year available) according to AICPA data.

The problem isn’t that CPA firms won’t hire such candidates as much as it is that there simply aren’t enough minority candidates to hire from out of college. Parents of these minorities definitely want their children to become professionals – doctors, lawyers and teachers – but they simply don’t have the same view of the accounting profession. They don’t understand our profession and therefore don’t value it.

It is important that we change that perception. Whites will be a declining portion of our population, becoming a minority in this country sometime in the twenty-first century. While we have done an admirable job filling the pipeline with women, that simply won’t be enough in the future. We need the best and the brightest minorities to join our profession as well, or we will be a second class profession unable to fulfill its mandate as time marches on.

The AICPA is working with a number of groups to change the opinions about the profession. You can read more in this Journal of Accountancy article. But there is one simple thing you can do. Every time you meet with a minority friend, coworker or client, make sure they know how good the accounting profession is and what a great place it would be for their child to have a long and rewarding career.


Accounting Musings

Some random thoughts on accounting:

Ever want to record an asset you don’t own, revenues you won’t receive and expenses you won’t pay and not go to jail? Just do a sale-leaseback and then fail the sale-leaseback accounting requirements. The resulting accounting takes you into the surreal. It might even make you long for a new leasing standard that would eliminate all of the sale-leaseback rules.

If the direct method of cash flow presentation is so much better than the indirect method, why do the rules require you to also present the indirect method in the footnotes when you use the direct method on the cash flow statement? Shouldn’t it be the other way around?

If I can start recognizing revenue for cash I haven’t received and won’t receive unless I deliver other services in the future (under the proposed revenue recognition standard) will they finally allow me to recognize probable contingent gains for cash I haven’t received, but for which I don’t have to do anything but wait for the cash to be delivered? I mean the whole argument is we should represent unbiased economic outcomes –if I have to recognize probable contingent loses but I can’t recognize probable contingent gains, it doesn’t sound unbiased to me.

I wish users who think every lease is just a form of financing would go talk to someone who rents a house and then someone else who bought it and makes a mortgage payment. Maybe it’s me, but I think the house lessee and the house buyer think very different about their “asset” and their financing liability.

In a world of matrix reporting and real time access to reports that allow you to drill-down to the lowest level of detail in seconds, who is the Chief Operating Decision Maker and more importantly what “report(s)” do they look at so you can decide what segments you have to report?

What strange accounting results have you encountered in your career?


Picking an Accounting Program

My nephew, who is a Junior in High School and currently intends to major in Acconting, called me the other day to talk about what college he should go to.   He asked questions about how determine how a college is viewed by employers and does going to a certain college make a difference in your career.  He also asked about getting a bachelors degree with 150 hours or getting a bachelors and masters degree in obtaining the 150 hours required to sit for the CPA exam.

The first question was tough because there are so many good accounting programs out there.  I could tell him to look at the ratings that come out every year, but his question was really more than that.  He asked about the impact on your career.  I told him that after about five years, the college listed on your resume mattered less than your actual work experience in advancing your career, but that is the “long-term view” and as the saying goes in the long-term we’re all dead any way. 

The advice I finally decided on was to tell him to ask what accounting firms and businesses regularly recruited from the College or University and do they come on Campus or not to recruit.  For example, if his desire is to go to work for one of the big four accounting firms then he should pick a college that the big four regularly recruit from.  If his desire is to go straight into industry then he might need to be looking at a different set of institutions.  Of course, most High School Seniors don’t have a clue what they want to do in the profession after they finish school, so I suggested he look for a College or University that was recruited by a variety of businesses and firms.

Of course, that is based on all other things being equal and that he feels comfortable at the college he chooses.   Colleges and Universities have different cultures and personalities and no matter how high it is ranked, if that culture is not a good fit, he shouldn’t go there.  That’s why I pointed out that after a few years, the school on the resume’ starts to lose its importance when compared to the work experience.  And in our profession, where there are so many different career paths, it is easy to start your career in one place and end somewhere completely different if that is where your heart takes you.

His other question was about getting just a Bachelors degree or getting both a Bachelors as well as a Masters.  I told him that almost every state now requires 150 hours (5 years) to become a CPA.  While there are a significant number of people who go the route of getting the hours but only have the bachelors degree, I suggested that if you were going to go to the trouble of doing the 150 semester hours of work, wouldn’t it make sense to have something more to show for it than just the right to sit for the CPA exam. (Full disclosure – I stuck around and got a Master of Accountancy degree back in the ‘80’s when it wasn’t generally required to become a CPA in most states.) I know some people will have different opinions in this area, but I believe the extra degree, unlike which college I attended, continues to make an impression on those that read my resume’, and continues to open up additional opportunities for me as a result.

So what do you think?  Did I give my nephew good advice?  Or should I call him back and tell him something different.