Changing Accounting Standards

What are some of the biggest headaches in accounting?  I’m sure you have your favorites, but let me tell you about Doug.  I called him last week to see if he wanted to go for a drink, but he was still in the office late on a Friday evening.  It turns out his company adopted some of the new International Financial Reporting Standards, so he has to go back and restate the numbers, right back to his opening balance sheet at the end of 2009, and then carry the results forward using the new rules.

“As if that wasn’t enough,” he said.  “We’ve got a bunch of contracts that go back ten years or more.  The auditors now want proof of existence.  They never asked for that before and they don’t accept the fact that we get payments each month.  They want to see the actual paper.  I mean, I know we have them.  They’re piled up on skids at the back of the plant.  But it’s really dirty back there and it’s going to take days to find all the ones the auditors want to see.”

When rules change, they never get simpler.  So often you have to go back to the original transaction and interpret it in light of the new rules.  And it’s not like you can plan for the change.  I can’t tell you the number of times I have wished I had had the original documentation about a transaction so I could see who signed it and ask them what they were thinking at the time.  Or, better yet, if I could have the emails or memos that led up to the deal, so I could understand the intentions of the parties.

Wouldn’t it be nice if you could click a button and see the documentation?  Or what if charities and universities could track the trust documents and bequests in their endowments.  I know a church that wanted to consolidate its endowments because many of them were tiny.  The $5,000 that was a significant gift in 1960 was now almost more trouble than it was worth.  It would have been helpful to have all the original documentation, so that they could approach the surviving families and/or the public trustee.

Honestly, I don’t know which is Doug’s biggest headache, the changing rules or auditors’ demands, but I’ll let you know after we finally go for that drink.  What is your biggest accounting headache?  I’d be happy to feature some in future blogs.

Reposted with the kind permission of iDatix:  http://www.idatix.com/insider-perspective-changing-accounting-standards/

Farewell CFO

"There are no mistakes in the universe, no accidents.  Everything has a reason,"

says my friend Alice, an astrologer.

Another way to look at it is that every moment, every experience, has a seed of learning and growth in it.  The challenge for us is to find it.

I have just come from a funeral where I didn't know anybody.  I was there in support of a friend, but we didn't end up connecting.

I just sat in the back and watched.  The largest room in the funeral home was two thirds full.  There were so many tears, so much grief:  men and women, young and old.  This man had clearly touched a lot of people.  As the service unfolded, I got a sense of his story.

Steven (not his real name) was cut down by cancer at the age of fifty-five.  He was an accountant, the Chief Financial Officer of his company.  His boss, the Chief Executive Officer and company founder, was the first to speak.  He described Steven as the mature one, the one who could make the numbers fit, the company's conscience.  He also spoke of Steven as one of the ones driving the company forward, having a solid grasp of where they could go and what they could achieve.

The second speaker represented Steven's hobby, ballroom dancing.  She spoke of Steven and Grace, his partner and wife, their spirit, and Steven's ambition to be the best.  Steven and Grace represented his adopted country at an international amateur competition and he was particularly proud to carry the flag in the opening ceremonies.

The third speaker was an old friend of Steven's from Hong Kong.  He spoke of Steven's other hobby, music, and the bands they had put together so long ago.  He also told a touching story about Steven's first date with Grace, when he spent a week's salary on a candle-lit dinner for two at a fancy restaurant, a large initial "investment" that had paid dividends for the rest of his life.

Steven was never awarded the Nobel Prize for Peace.  I doubt that the Wall Street Journal will note his passing.  He will not even be a footnote in this nation's history, yet he touched a lot of people deeply with his spirit, his willingness to help and his drive to be a better person.  The lesson for me, accountant, CFO, former amateur ballroom dancing enthusiast and amateur musician, was clear.

Maybe I should listen to a few more of the things my friend Alice says.

CFO = Maestro?

Is this your image of a conductor, someone who insists on being called "maestro", someone with a whim of iron who can quell opposition with a single insult, someone who makes trained professionals quake in their boots?

Now, let me tell you about Peter. He's a professional. He has exacting standards. He knows what he wants and he works hard to get it from the choir and musicians he conducts.

But somehow, naked aggression is not in his toolbox. You will hear him laugh rather than snarl. He is more supportive than demanding. But he's not soft. When the altos were hesitant about their entrance, he stopped the music and asked them to inject more confidence into their part. He then repeated the section.

He treats his soloists with respect. He will consult with them about timing, but still he knows what he wants. "There is a time for drama, for spitting out the consonants and cutting the notes short. This is not that time. You need to lament," he tells a tenor. Later in the practice he will compliment him when the tenor injects the right amount of drama into another part. Peter's direction is clear and precise. He is careful that everyone knows their cue. When people don't understand, he takes the time to choose other words to describe what he wants.

The work we're practicing is Handel's Messiah and Peter has invited me to play trumpet. There are over 50 individual pieces of music in the Messiah and the trumpet figures prominently in only three of them, so I have lots of time to study Peter's style.

If I had to use one word to describe Peter, it would be "professional". He doesn't use his position to demand respect, he earns it. He knows his voice will be heard because he knows how to listen. I have never seen him raise his voice, yet he makes it clear when he thinks you could play better or are out of alignment with his musical vision. On the whole he is a casual person, yet, when the situation requires it, he assumes the dignity and poise of his position.

He makes mistakes. He will stop the practice, say that he started at the wrong speed and make a note on his score so that he doesn't do it again. If someone on the team objects to one of his decisions, he will listen and is willing to change his approach. Somehow that makes other people willing to change their approach as well. The result is a committed, professional team of people who enjoy their work.

Now, what's your image of a CFO?