Posted by Commie B on November 4, 2008 at 10:44 pm
I’ve written articles before discussing the basics of chartered and certified accountancy, mentioning names of certifications and institutes that issue the certifying licenses, but I’ve never really discussed what the primary difference is between the UK and US certification model.
It is interesting to note that this same difference is also reflective of the general educational ideology of both countries, and pours into the business and corporate culture. That said, it is safe to say that public accounting certifications in both countries, the Chartered Accountancy (ACA) licensed by the Institute of Chartered Accountants in England and Wales (ICAEW) in the UK and the Certified Public Accountant (CPA), licensed by the American Institute of Certified Public Accountants (AICPA) in the US, follow a rather similar pattern. They start with pretty basic level papers and work their way upto technical financial accounting with the ultimate goal of preparing you for conducting audits, and work experience is a requirement before you can even sit for some of the papers.
However, when it comes to management accounting certifications for industry, there is a massive difference in the way the two countries market and manage the qualifications. In the UK, CIMA, ACCA, AAT etc. are all guaged toward accounting and non accounting college majors / graduates alike. They start with the basic, classic, outdated financial and cost accounting concepts, and work their way up to fancy financial and management reporting. The early papers are a waste of time for students who are accounting majors in university, the these certifications don’t give it any value. There are no experience or educational requirements before you can sit for the exam. The exams are driven to help you memorize concepts, rather than understand and apply them. The study material is not very practical in approach, and as a whole, the quality of business relevant financial education you get from these certifications in the UK may not really be that good. However, they are still considered vital to the stamped-paper, bureaucratically obsessed, paper-pushing UK market.
In the US, however, the standard is different. Take the Institute of Management Accountants, for instance. They offer to Financial Management Certifications: the Certified Management Accountant (CMA) and the Certified Financial Manager (CFM). Both Certifications require accounting degrees (like the CPA) or several years of experience in the accounting industry. The reason: Management Accounting Certifications are not geared toward non-accounting majors. The content is technical, and the idea is to further train accountants help enhance their knowledge and application of management accounting concepts and financial accounting regulations. With that in mind, the IMA does not flood you with waste of time, silly, O’Level based accounting papers that discuss the basics of debits and credits. For both Certifications, the IMA has a total of 6 papers you need to pass. However, and this is where the primary difference flows through into corporate America, you need 78% to pass IMA exams, whereas you need only 50% to pass CIMA papers? Why? Well, it would seem like CIMA is just trying to churn out accountants; people who can do the basics of accounting. IMA, on the other hand, is aiming for financial managers: accountants who understand the ramifications of various financial and management accounting principles.
I, personally, have been disappointed with the content of CIMA in the UK. You walk away with very little, and the education is highly impractical for business purposes. IMA, on the other hand, focused on know what you did well, and the exams were based more on your understanding and application of concepts, rules, and regulations rather than committing concepts and definitions to memory. I would say the IMA definitely offers better knowledge in less time and challenges you more to succeed while providing more practical and corporate education. CIMA content desperately needs an overhaul given the state of the business world in the 21st century.
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Posted by Commie B on March 22, 2008 at 5:56 pm
Over the past 7 years, I’ve served in various accounting-related positions, and I have seen all different kinds of people throw around different kinds of words pertaining to accountants and bookkeepers. The three most common ones are bookkeepers, accountants, and beancounters. Well, some might say nobody really gives a damn what people say, but in a world where corporations rely solely on image to get business and ruin the economy, classifications in your field followed by the right subsequent designation/job title can be very important to the success of an accountant.
So, what is a Bookkeeper?
Let’s start off by saying that all accountants need to know how to do bookkeeping. Bookkeeping, without getting into too much of the history, is simply the act of keeping books using the Double Entry System. As a bookkeeper, you maintain ledger accounts in all the different ledgers, and maintain all subsidiary documents like the cash book, etc. Sounds similar to what an accountant might do, right? Well, yes, it is. However, the role of a bookkeeper ends at the Trial Balance. Once your accounting period ends and the ledger accounts are closed to produce a trial balance, and once the trial balance is produced, it is ideally handed over to an accountant to generate the statements or reports.
So, what is an Accountant?
An accountant is an advanced bookkeeper, who is familiar the typical financial statements: i.e., Profit & Loss Account / Income Statement, Trading Account, Balance Sheet, Cash Flow, etc. etc. But keep in mind that being an accountant does not mean that you are familiar with the statement. The key is to know what goes into producing such a statement. Income Statements and Balance Sheets are relatively simple and standard, but then the cash flow is a statement most accountants struggle with, and its not their fault. The typical cash flow statement isn’t exactly designed for efficiency, and that’s where the roles of different accountants come in.
So, to sum it up, an accountant uses the information produced by a bookkeeper to generate meaningful financial statements and reports. An accountant MUST have comprehensive bookkeeping knowledge, and must continue to practice his/her double entry/ T-Accounts skills, or really, he/she won’t make for a very good accountant.
Public Accountants will NOT be covered in this discussion. They are also known as auditors. We all know they don’t warrant much discussion.
Financial Accountant vs. Management Accountant
Okay, this is an unusually fancy difference between Accountants, and I think it exists primarily because of the politicization and commercialization of institutions like CIMA and IMA.
Financial Accountant is basically classified as someone who prepares financial statements and reports, i.e., your standard P & L, Income Statement, Balance Sheet, Cash Flow, Aged Receivables, Aged Payables, etc.
A Management Accountant is supposed to be someone who converts these financial statements into reports that management needs for their analysis, which should ideally make a management accountant a mix of a corporate finance expert and a financial accountant. As interesting as it is, almost ALL good financial accounts have the knowledge needed to for the role of the Management Accountant, if you are an Accountant who can’t understand what the needs and requirements of management are reporting-wise and you cannot deliver them, well, then you should rethink your career.
Let’s be clear on one thing: Bookkeeping and Accounting are complimentary work; one cannot exist without the other. In Small Businesses, you typically only have one person doing everything (as unwise as that may be for a multitude of other reasons).
I’m going to write another article on typical job titles / designations very soon, because in the Accounting field these have become extremely diverse and confusing. It’s more fancy work, ultimately the commercializtion of the profession, but then that’s what the world loves most.
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Posted by Commie B on March 14, 2008 at 2:00 am
With the plethora of accounting certifications and qualifications out there today, no matter what country you are in, it can be a daunting task to choose which certification is right for you. Gone are the days when if you were a young fellow who aimed toward getting the Certified Public Accountant Certification (CPA) issued by the AICPA in the US; gone are the days when you could just become a Chartered Accountant (CA) in the UK, or for that matter anywhere else in the world.
The typical certified public or chartered accountant today is just one of the many recognized, approved and qualified accounting certifications today. There are numerous others, irrespective of where you are: the Association of Chartered Certified Accountants (ACCA, International) Certification, the Association of Accounting Technicians Certification (AAT, UK), the Certified Management Accountant (CMA) & the Certified Financial Manager (CFM) Certifications issued by the Institute of Management Accountants (IMA, USA), the Chartered Institute of Management Accountants Certification (CIMA, UK & International) which is totally a tier based certification, starting with entry, managerial, strategic and TOPCIMA. If you dig deeper into the US & UK Markets, you’ll see many others, and each of them has their own following. I recently found out that there was an Institute of Financial Accountants (IFA) in the UK, and it’s a pretty major organization. Interestingly enough, I’ve never seen ANY job advertised asking for a certification from the IFA. Questionable? Who in the hell knows.
But here is what I can tell you. Accounting has become a diversified field. The certifications mentioned above are only some of the management/financial/public accountant type, and there are other new accountant types, which come with some fascinating certifications of there own. The upcoming accountant job titles you will come across now are forensic accountants, environmental accountants, project accountants, systems accountants, etc. etc. The list is never ending. Gone are the days when you trained to be a Director of Finance/CFO, Financial Controller, or simply strived to become an auditor in a public accountancy firm. However, in today’s competitive world, no matter what country you are in, it is VERY important to pick the accountancy field that you want to go into. Since each of these fields/job titles in accounting has its own relevant certification or qualification, it can sometimes be difficult to trespass from one into the other. Also note that some of these are not multinational certifications, and when going cross border, especially between 2 first world countries (the US & UK, for instance), having one kind of a background or certification can cause you quite the grief.
Take, for instance, the simple line of Financial & Management Accounting. There are people out there, and particularly recruitment consultant characters, who will try to convince you that there is a LOT of difference between Financial & Management Accountants. Well, I’m here to tell you: bull-fecking shit. Management Accountants are for incompetent business owners; financial accountants are for compliance. That statement is true, but what good is a financial accountant who can only comply? That’s no accountant; he’s a simple instruction taker.
Back to the topic at hand. If management or financial accounting is the field you want to pursue, well, CIMA is your certification for Europe and most parts of Asia. If you are in the US, CMA or CFM from the IMA is the direction you should be headed in; and despite the common ground between the two, do NOT be confused or deceived. One will not co-operate with the other. The two are essentially competitors, with the IMA fighting for international recognition alongside CIMA. But get this, the AICPA feels so threatened by the IMA in the US, primarily because they are rightly carving our a different role/job description for financial managers in firms (a very niche position that CPA/CA types aren’t meant for), that they went out of the way to cut a deal with CIMA, saying that CIMA is indeed a decent certification, and that CIMA is an institution they recognize. There was an entire article in the IMA Magazine regarding the issue, and the problem is, the AICPA cannot risk losing the value of its members within the US, so it refuses to accept the separate role or importance of Financial & Management Accountants.
But the US is not a country where all is lost. Quality matters. America is probably the only place in the world where at some level, it’s not who you know, but what you know, with the result that even today, you can succeed in industry/private sector in the US without any certifications, but only if you know what the hell it is that you’re doing. Ideally, if you are going into industry, stick to the IMA Certifications: CMA & CFM. They are relevant! AICPA has become bloated and extremely political, and let’s face it, most Certified Public Accounants really can get dull. It’s not their fault. If you sole purpose in life is to assure the work of others, your existence falls into the misery of being second for good! AND, due to the tactics and acts of Certified Public Accountants, today, if we creative financal & management accounting types get creative with our work, we get penalized. Way to go, AICPA!
Now, if you’re in the UK, CIMA is the way to go. I have seen, with my exposure to this market, and some Asian & Middle East ones, that being a Chartered Accountant always helps. It looks good, no matter what job you apply for, but it is not always relevant. Being a CA does by no means make you good at management or financial accounting; it just means you can dig yourself in papers for hours and hours and not get fed up, which, on a whole different level, is something admirable since I myself have difficulty with that. Certifications for Private/Industry Accountants in the UK with value are the ACCA, the AAT, and CIMA. Note that if you come to the UK with other certifications from other countries (other than a CA which is issed by an Institute which is authorized/accredited by the Institute of Chartered Accountants in England & Wales [ICAEW]), like the ICMA you can get in India and Pakistan, which is the Istitute of Cost & Management Accountants, you won’t get too far over here.
For some reason, the ACCA is considered a medium level certification over here. I’m not sure why; maybe they haven’t advertised or marketed enough, but ACCAs are for some reason not given executive treatment, especially not to the level of the CIMA qualified personnel. CIMA, in the UK, is considered an executive level certification, and passing it in this country means that you have stood the accounting test of time, and deserve salary, whether or not you know anything is irrelevant. Although the basic content in ACCA & CIMA is comparable, as is the basic content of the CMA and CFM in the US (with an exception ot the differences between US GAAP, UK GAAP & IFRS/IASB), CIMA has marketed themselves well, and has forged business alliances that have given them the executive reputation. So, if you want to make it big in industry as a Controller, Director of Finance, VP of Finance, or a CFO, CIMA is the Certification you should be looking that. Correct me if I am wrong, but I think you will get there with the ACCA too. It will just take longer than with CIMA. AAT, on the other hand, has been coming up with all the positive marketing they’ve been doing lately. However, I think AAT is still considered an entry level professional certification for non-accounting degree holders, and it makes you familiar with some of the technical aspects of accounting in the UK: VAT, PAYE, NI, etc. etc. Hence, the name Accounting Technician.
Let’s be honest, interesting or not, right or wrong, there is a big following that goes with the CPA and CA Certifications. So you’re always playing it safe by aiming for one of those. They may not be relevant for industry, but they will and have always held their importance, since auditing has become a vital part of big corporate money. Of course, if it has been your lifelong dream to become a public accountant, to project your affairs into other people’s business, and spend the rest of your professional life assuring others that their work is upto par, well, what can I say, by all means, go ahead. No offence meant. I have nothing against Certified Public Accountants or Chartered Accountants. I just think the role of Auditor is boring. I could never do it. I barely got through Auditing Class. Unto each his own, eh!
This article is written courtesy of VAFTA Solutions Limited.
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