CFO differences in countries (1 Viewer)

[turtleface]

Theres something strange I've noticed

In Australia, England, Canada, all the commonwealth countries, the Chief Financial Officer(CFO) or equivalently, the Finance Director (FD), is almost always (maybe 95% of the time) a Chartered Accountant (or CPA,CGA,CIMA,CMA etc. i.e. a Postgrad qualified Accountant)

In the United States, although the smaller companies (Top 500 onwards) typically all have a CPA as their CFO, a LOT (i.e. at least 50%) of Top 200 companies have a CFO who is either not a CPA nor from an Accounting background.

My thoughts on the reason why are below:

In the U.S., many incoming CFOs do not hail from the ranks of Financial Controllers (the Chief Accounting Officer under the CFO, who are 100% all Accountants regardless of country) like they do in Australia and England etc. Some U.S. CFOs hail from the ranks of Treasurers, who are typically a mix of Accountants, Lawyers, but mostly Investment Bankers and Economists.

And also, because the CPA designation in America is suited for Auditing and Public Accounting, most Management/Corporate Accountants would not have a CPA, so many CFOs would be from an Accounting background, just not a CPA.

However, I think at least 50% of CFOs of Top 500 companies are still not from Accounting backgrounds. Many are not even from business backgrounds, with some like Googles CFO (I think) who is from a Science background.

Of course, this poses no issue in big companies because they usually have a CPA as the Financial Controller anyway, and s/he becomes the de facto Chief Accounting Officer because the CFO has less Accounting knowledge.

By the way, I say "less" Accounting knowledge because almost all CFOs have either a CPA or a MBA. In the bigger companies, more have MBAs than CPAs.

I'm not sure if my guesses seem reasonable. Does anyone know why Big Company Finance Directors and CFOs are always Accountants in Australia, England etc., but not in the U.S.?

 

[pete_mate]

because they have bigger companies.

When being a CFO management skills and general abilities are more important than knowing obscure accounting standards.

I would say that being a CPA is very useless when you are a CFO. It merely gets you there.

 

[turtleface]

lol do you disagree with him where he says CPA is very useless for CFOs, or do you disagree that CPA can get you to CFO position (or both?)

 

[AppleXY]

I think he highly disagrees with the comment. I do too.

 

[pete_mate]

sure, making sure standards comply is probably a little bit important, but dont insult me, i've been the CFO of a company, sure it was a small coffee sales one with 15 people, but preparing financial statements is only one aspect of the job.

Take the CFO of macdonalds international. He's got to place hedging and derivatives in place to ensure that the company is managing the risk of operating in several differant currencies, he's got to manage billions in sales and ensuring the cash flow is managed and utlisised on overnight money markets in all markets.

He's got to watch the share price and determine the correct dividend to pay, formualte a long term growth strategy and budget that accordingly.

He has to integrate the finances of the company with other departments, such as the marketing and operation departments and their pricing and cost structures.

so here we have the economics, finance, and law areas come in to play.

IF your a bean-counting accountant that's spent 20 years auditing companies to ensure they meet a list of standards in a particular specialised industry from a book that is 50cm thick. HOW THE FUCK CAN YOU DO THE ABOVE. You're not cheif accountant, your the chief financial officer ffs. you are the one that is naive.

"a LOT (i.e. at least 50%) of Top 200 companies have a CFO who is either not a CPA nor from an Accounting background." Gee, i wonder why.

 

[pete_mate]

And also dickface!

Chief Financial Officer = Chief Accountant

no it doesnt, there is a very good reason why companies call it CFO and not chief accountant. Because an accountant does not necessarily know anything about finance, law or economics, which you conceded.

I highly doubt this "keeping up to date with developments in the field of finance" would compensate for the mere 2 years required to become a CPA.

Are you honestly saying that just because some accountant get's his CPA, he's instantly in a position to be a CFO?

It requires a broad set of knowledge because; the cpa qualification is mainly concerned with the preperation of financial records (and the standards therein) not with the strategic management of the business finances. This is where management consultants, lawyers, economists, bankers. and other experienced professionals from all fields concerned with money come in.

So what if the CFO knows how to present a "true and fair position of the finances" if he hasnt managed the fucking finances correctly because he's so inexperienced at running companies (only auditing them), the company will be bankrupt. But at least he will have an accurate representation of being bankrupt. yay for the cpa.

you are so fucking naive, go read cpa brochures and stop spreading propoganda.

 

[seremify007]

ROFLMAO @ the guy who was "CFO" of a small coffeeshop. That's like my cousins who give themselves interesting titles like "Finance Director".

 

[Meads]

I am a CFO.

Of my personal bank accounts and investments.

 

[turtleface]

lol
I forgot to mention most non CPA CFOs in the U.S. have a MBA/are from an Investment Banking background so they still know about standards. But again this only applies to about 50% of the top 500 companies in the U.S. Almost every other CFO I have seen is a CPA/CA.

I think its because to some of the ultra large (U.S.) companies, the CFO role becomes more of a deputy CEO role, and they are not concerned with putting a technically competent Accountant in it because they have a CPA/CA Financial Controller, and tons of CPAs/CAs in the Finance (aka Accounting) Department anyway. Hence why we see even Scientists in CFO role. I think those companies have become so big they need 2 effective top CEOs.

Again, this is just 50% of the U.S. top 500 companies. In Australia and England and the rest of the world's top 500 companies, as well as almost all of the smaller U.S. companies, 95-100% of CFOs/FDs are post graduate qualified Accountants. The only exceptions in Australia I know of are like Wesfarmers, who have a Mathematician, and Qantas, who is sort of an Accountant anyway.

Chief Financial Officer = Chief Accountant

Yes I think it would be correct to say this, since the CFO is the ranking Accounting officer, and if doing Accounting makes you an Accountant, then he/she's the Chief Accountant. Even if they aren't a CA or CPA.

no it doesnt, there is a very good reason why companies call it CFO and not chief accountant. Because an accountant does not necessarily know anything about finance, law or economics, which you conceded.

You'd find any Accountant knows more than enough about Capital Market Finance, Corporate Finance, Financial Management, Corporate Law, Taxation Law, Microeconomics etc. After all, Accounting students are forced to do those subjects

The reason it is called CFO is just like the reason Head Accountants in England are called Finance Directors and Finance Managers, and also the reason Accounting departments are called "Group Finance" in ANZ, and "Finance" in Woolworths, "Finance and Administration" in Telstra etc.
I highly doubt this "keeping up to date with developments in the field of finance" would compensate for the mere 2 years required to become a CPA.
[/quote]
The U.S. CPA (Certified Public Accountant) is much more onerous than 2 years.
Also, although Accountants understand "Finance", the CFO is responsible for 1 business, not a market. When they need specialty Finance advice, thats what Investment Banks are for (I imagine they wouldn't be issuing shares/merging every week).

In your example of the Maccas CFO about hedging and what not. Sure he needs to understand all that but that is part and parcel of being the company's chief accountant - that's a NO BRAINER!!!! DUH!!!.
The training required to become a CPA or CA will necessitate that such qualified accountants would understand all that. Further, to keep CPA or CA status they will need to keep up-to-date with all developments in finance and accounting - including financial markets, instruments and what not. Thats the value of a CPA or CA.
You would want to know that your CFO understands all that financial markets shit as a bonus but at a bare minimum would need to understand that the financials are representing a true and fair view of the company's financial position. Only a qualified accountant who is required to keep up to date with changes in accounting standards and developments in the field of finance would have the depth of knowledge through years of training and experience to properly carry out the function of a competent CFO.

Yeah I agree, Standards and Financial Reporting is just one area of Accounting. Accountants have to learn a bit of everything in order to solve recognition issues anyway.

Are you honestly saying that just because some accountant get's his CPA, he's instantly in a position to be a CFO.

I would, of course they need to have the correct experience and performance history. Some Accountants made CFO (and now even CEO) without CA/CPA like Trevor O'Hoy at Fosters. (At least I don't think he has CA/CPA)

It requires a broad set of knowledge because; the cpa qualification is mainly concerned with the preperation of financial records (and the standards therein) not with the strategic management of the business finances. This is where management consultants, lawyers, economists, bankers. and other experienced professionals from all fields concerned with money come in.
So what if the CFO knows how to present a "true and fair position of the finances" if he hasnt managed the fucking finances correctly because he's so inexperienced at running companies (only auditing them), the company will be bankrupt. But at least he will have an accurate representation of being bankrupt. yay for the cpa.

So who the fuck do you propose to be a CFO of a large public company? a dentist? an engineer? you really want a doctor to put together and sign-off on the financials of the company and come up with associated financial strategies for the company?
And your dimwitted statement that "the cpa qualification is mainly concerned with the preperation of financial records (and the standards therein) not with the strategic management of the business finances" is completely incorrect and complete drivel - like everything you have said. FUCK you do not have a clue. A person who puts the financials together is a fucking bookkeeper. The role of an accountant is to provide strategic management advice to senior management of the company - that is where the title chief accountant came from which has since been evolved to become chief financial officer.
Your problem is that you can't grasp the concept of the difference between CFO (who needs to be an expert on accounting and finance) and a CEO (who needs to know a bit about accounting, finance, law, economics, etc.).

I agree with Tacky's points (minus profanities/insults lol). One thing I'll add is that External Administrators (i.e. the guys who come in and have to recover/wind down failing/failed/in distress companies) are 100% CA/CPAs in Australia. In fact to be a registered/official Liquidator you have to be a CA or a CPA.
So if the Mark Korda and Mark Mentha, Ansett Administrators, and Tony McGrath at HIH and Pan Pharmaceuticals had no idea about running a business, or Law or economics or finance from their CA, then obviously I doubt creditors would allow them to be appointed Administrators, and in charge of the well being of so many stakeholders (Creditors, employees etc)
Though the Insolvency Profession did cop some flack for costing too much, and charging so much that sometimes most of the remaining cash is paid to them, but with such a buoyant economy who can blame them, but that doesn't help my case so lets leave it...
Not to mention that so many CEOs are CAs/CPAs (e.g. Coles Myer, BHP, Tattersalls, Stockland, Virgin Blue, Promina, QBE Insurance) so I think being a CA/CPA does give you some degree of competency in being able to run a company without it becoming bankrupt.
But then again...Rodney Adler was a Chartered Accountant...

 

[pete_mate]

I'm not getting the CFO position mixed up with the CEO position. You are getting Financial accounting mixed up with management accounting.

You cant seem to get it through you're thick head that the position requires MORE THAN JUST KNOWLEDGE OF ACCOUNTING STANDARDS (financial accounting). of course, that is a part of the position, (and i would argue it is quite a small part in larger companies), as turtleface has said, the financial controller "becomes the de facto Chief Accounting Officer because the CFO has less Accounting knowledge."

Therefore, your point about larger companies needing a CPA the most, is complete crap, otherwise this wouldn't be true, " I think at least 50% of CFOs of Top 500 companies are still not from Accounting backgrounds", as turtleface says.

So, how can non-accountants or god-forbid non-cpa's be more suited to the position? Because management accounting requires a knowledge of finance, economics, and experience managing accounts and businesses, not auditing and making sure they conform to correct standards which is all the cpa theory component really is.

A cpa may go on to manage companies, or consult them on management issues, but if he is merely an auditor that happens to have a cpa, there is no way that he is capable of performing the role of a financial director, in which case professionals with investment banking backgrounds and other experience are more suited, as is the case in America, especially if the other candidate has an MBA.

"a person who is CPA or CA qualified is certainly in a much better position than anyone else to look after the financials of the company." really, a 25 year old external auditor is in a better position than a 40 year old investment banker who has managed a series of railway trusts, and employed the use of structured finance to improve its cash flow and reduce debt while budgeting revenues to ensure it meets profitability requirements. Notice any differance in management experience? so what if he doesnt know whether to to record insurance paid in advance, it is comparatively insignificant in large companies.

The CEO and CFO share something in common, MANAGEMENT responsibility.

here's a basic example, they're both in a board meeting, CEO asks CFO whether, "Given the present financial position of the business, should we develop a new product?"

if the CFO only is concerned with creating the reports (and ensuring they meet standards), he doesnt know how to analyse them; plan ahead, look at economic conditions, or allocate funds and use budgets to enable to development process.

"Only a qualified accountant... ...[can] properly carry out the function of a competent CFO." only? how the fuck do those that arent qualified do it? maybe they won a competition? - "who wants to be the next CFO of microsoft?"
- tell me how

Where did dentists and engineers come from? dont trivialise my argument and carry on like a child insulting me because you're naive view of the world is challenged, CFO's dont have to have CPAs, it is important, but if the candidate fuflills the more important requirement of management ability in large organisations, then it is irrelevant.

Essentially it boils down to financial vs management accounting. Tacky can't make the distinction, in his muddled up cpa propoganda you'd think they were the same. The CPA program (and all big4 auditing) is mainly concerned with Financial accounting. If a cpa doesnt have the management accounting experience, then he is useless as a CFO. This therefore means that a non-cpa can become a CFO if he has management accounting skills.

 

[turtleface]

I agree with pete_mate when he says Management skills are essential for a CFO nowdays, though not with the view that CPAs are incompetent with Management Accounting.

I have difficulty accepting that Investment Bankers or other quasi-Finance professionals are more qualified to look after a company's finances than an Accounting professional.

The only evidence I need is that an Accountant can always move to Investment Banking, but an Investment Banker can never become an Accountant without further training.

A cpa may go on to manage companies, or consult them on management issues, but if he is merely an auditor that happens to have a cpa, there is no way that he is capable of performing the role of a financial director, in which case professionals with investment banking backgrounds and other experience are more suited, as is the case in America, especially if the other candidate has an MBA.

The term Finance Director is largely used in the U.K. business environment. In the UK almost all (again at least 95%) Finance Directors are CAs. I do not believe there are many, if any, Finance Directors who are from Investment Banking backgrounds.

In some of the larger U.S. banks, CFOs with Investment Banking backgrounds are only CFOs in Investment Banks. i.e. the CFO in an Investment Bank is just another executive position and CFO by title only, rather than by nature of responsibilities. But again, this is only an American thing, which was why I was wondering if it was strange.

In Australia, not only is Macquarie Bank's CFO Greg Ward a CA, but the head of the Investment Banking Division, Nicholas Moore is a CA too! Anyway, Investment Bankers know more about Accounting than many people think. I'd argue they know more about Accounting than Finance, since their role is to work with both sides of the Balance sheet and improve it.

In Australia, I would guess many,if not most CFOs are ex-auditors. The ex audit CFOs I can think of off the top of my head are:

Tom Pockett (?sp) at Woolworths (ex-big 4 senior manager-Audit)
Fraser McKenzie at Coles Myer (ex-EY -Audit)
Chris Brant at Transurban (ex-Deloitte Partner-Audit)
ANZ Peter Marriot (ex-KPMG Partner - Audit)
NAB Michael Ulmer (ex-KPMG and ex-CL(PwC)-not sure, maybe Audit, is a CA anyway)
CBA's CFO is ex-EY audit I think
Of course this is not an exhaustive list

if the CFO only is concerned with creating the reports (and ensuring they meet standards), he doesnt know how to analyse them; plan ahead, look at economic conditions, or allocate funds and use budgets to enable to development process.

Of course the CFO isn't concerned with just reports, they do lots of stuff, and a lot of this technical work is delegated to the Controller, or Management Accountants. It sounds like you think all the stuff you've mentioned there is done by Finance professionals. Its done by Accountants. Accountants forecast, do budgets, analyse budgets, allocate funds to projects etc., its cause Accountants are called "Finance" staff in the corporate world.

 

[turtleface]

AICPA Uniform CPA exam:


Section 2:

Business Environment and Concepts (BEC)

1. Business structure
2. Economic concepts
3. Financial management
4. Information technology
5. Planning and measurement

http://www.cpa-exam.org/cpa/computer_faqs_2.html

 

[Omnidragon]

pete, mate, are you trying to stir up tacky or turtleface? ^_^

 

[pete_mate]

hey fucker! you know what your problem is (amongst a whole lot of other things)? you are fucking dumb - its that simple. Dumb as a fucking dog!

You cant even keep a coherent argument going - all of a sudden its about financial accounting vs management accounting??????? where the heck did this come from?? this is not anything you mentioned in your original argument.

Whats the matter? realised that you were wrong so you have to bring up some shit out of blue about financial vs management accounting??????

If you cant keep your argument going then fuck off!

I seriously cant be bothered with shit like you - just go back to being the "CFO of your little coffee shop" will you.

So your response consists entirely of insults, you obviously dont have a rebuttal and it is your only form of defence to save face. You pathetic little child.

Thankyou for you're intelligent responses turtleface, i agree with your points. After a debate with my father, who was a CFO of an ASX company, (albeit a small one) and is an FCPA. I think that management and financial accounting are about equal importance. Though, consistent with my earlier points i beleive that although an accountant may have his cpa, he'd be useless as a CFO because he needs management accounting experience. Which is why being an auditor for longer than a few years is a reeally bad idea (unless you want to be a partner)

 

[jase_]

tacky - please tone down the use of language in your post.

 

[seremify007]

Gotta admit this topic was worth a few laughs though.

 

[Meads]

because they have bigger companies.

When being a CFO management skills and general abilities are more important than knowing obscure accounting standards.

I would say that being a CPA is very useless when you are a CFO. It merely gets you there.

This entire issue has stemmed from the above comment, which I personally believe is incorrect. However the point you are trying to make now pete seems a little different to this statement.

Being a CFO involves a mix, I dont think there should be any doubt about that. Being a CPA is certainly not useless when you are a CFO, I am convinced it would be the foundation. But what you say about management skills being important is also relevant. I dont think you would have a good shot at becoming a CFO if you were missing either of them.

Besides, alot of CFO's become CEO's. That is when the CPA or CA would become a little less important. But the bottom line is, your running a business that handles income and expense, having an accounting knowledge is going to make life alot easier.

 

[Smorter]

After a debate with my father, who was a CFO of an ASX company, (albeit a small one) and is an FCPA.

Cool a member of CPA Australia should have quite a lot of business management/strategy skills than a CP(ublic)A or CA. His views (RE: CFO finance vs. Accounting skills etc.) would be interesting if you could put them here.

I think I get what you're getting at. Although the functions of Financial Accounting and Finance are meant to overlap, it is the skills and job function of the Management Accountant that nowdays deals with the "finance-y" aspects of business. So much so that the "Management Accountants" term is almost non existent and instead are called "Financial Analysts" or "Business Analysts" or "Finance Managers" etc. Management Accounting seems to be a very value adding trait preferred amongst Accountants.

On a seperate but arguably related matter, the Management experience aspect is really important in CFOs. These days many CFOs start off as a Management Accountant for a few years, then transfer to an Operational role as soon as possible, whether that be a Line Manager, or eventually Chief Operations Officer.

Those who do not only have good chances of making CFO, but often go on to become CEO.

The following document I've attached is a KPMG/ICAA document on CFOs, its probably a bit out of date now, and maybe a new one has come out but I've just found it on my hard drive.

Although the CFO has generally been regarded as the "Head Bean Counter", in the tech boom years, as well as the 80's in the U.S., the previous monopoly Accountants had on the role was degraded a bit, as ultra deal savvy Investment Bankers, and non Finance executives came in on the Accountant's turf.

There is evidence of a reversal now, as the SOX act in the U.S. has lead to a renewed focus on Financial Reporting skills, rather than the debt hiding, and the complex structures Investment Bankers did when they were CFOs.

Empirical evidence from research also suggests there is a statistically significant reduction in earnings restatements as a result of a CFO having a CPA, or similar professional accounting qualification.

Once the current generation of 1980's and 1990's batch of Investment Banker/MBA CFOs start to retire, we will see a lot more CPAs in the U.S.

Figures from a few years ago, before Enron, Adelphia, Waste Management, WorldCom, Xerox etc. and the subsequent SOX legislation, the U.S. Top 500 listed companies was broken down as follows:
(these figures contain overlap, i.e. someone with a CPA and MBA would count towards both figures)

CPAs: 30% (of CFOs have: )
MBAs: 50% (of CFOs have: )

You'd wonder what the remainder have, and it turns out stuff like Engineering, Mathematics, Science, even Law (in part remants of the tech boom)

I'd say nowdays CPAs would have a similar concentration, but the number of MBAs would have increased.

In non U.S. countries, it seems Accountants still have a monopoly on the CFO/FD roles. It is very rare to see a non CPA/CA in a CFO role in Australia.

Below Document Source: KPMG/Institute of Chartered Accountants in Australia, 2003

 

[turtleface]

Just had a look at a U.S. and U.K. job site for advertisements for Chief Financial Officers (CFOs) and the U.K. Equivalent, the Finance Director (FD):

Before I begin, I'll just clarify something:
When I use blue CPA, I mean a member of CPA Australia
When I use red CPA, I mean an American Certified Public Accountant

I was really surprised by the results:

In the U.K., Chartered Accountants (CAs) don't seem to be king like they are in Australia, where more than 60% of ASX 200 companies CFO's are CAs. A lot of their Finance Director advertisements looks for CIMAs (Chartered Management Accountants) or ACCAs (Chartered Certified Accountants) (i.e. the UK version of CPAs) (Admittedly, most FDs of large companies are CAs)

In the U.S., there seemed to be some advertisements that said either:

"CPA and/or MBA required" or,
"CPA compulsory" or,
"CPA a plus, but not essential"

Most also required a Bachelors degree in Accounting, and in a few cases Accounting or Finance. Some also required a Masters degree in Accounting. They love their qualifications in the U.S. -_-

Although some did not mention CPA , most said that experience with statutory reporting is a must. It is unlikely that anyone that has such experience, is not a CPA.

Personally, I'm heartened. Although CFOs have almost always been CA/CPA/other qualified Accountants in Australia and the U.K., the U.S. has seemed to be the exception, with all sorts of Bankers, Lawyers and Scientists occupying CFO positions. It looks like the trend is reversing.

 

[jpr333]

To say you were obsessive would be a masssive understatement imo turtle. What will the reality of life post uni be for you though? Grinding the treadmill in a big 4 firm, and get stuck at low level or maybe mid level management with little chance of becoming partner? That would suck. Can you look at the stats on that, wouldn't that be a tad more relevant to YOU??