Title: Navigating Challenges with Our New finance Director: A Surprising Lack of Fundamental Understanding
In a surprising turn of events, our company recently welcomed a new finance Director with an extensive background in corporate finance, boasting over 20 years of experience, a Big 4 pedigree, and an MBA from a reputable institution. As a senior accountant directly reporting to her, I had high expectations; however, the past few weeks have highlighted some concerning gaps in her foundational knowledge.
Just yesterday, I was guiding her through our monthly close process when she posed a perplexing question regarding depreciation. She bluntly asked why we “waste money every month on depreciation expenses when we’re not actually spending anything.” Initially, I assumed she was testing my knowledge, but it quickly became clear that she genuinely did not understand the concept.
I diligently explained that depreciation is a crucial Accounting principle that allocates the cost of an asset over its useful life, allowing us to match expenses with the revenues generated during those periods. Despite my explanation, I was met with confusion when she remarked, “But we already paid for the equipment. Why are we expensing it again?”
In an effort to clarify, I referenced Generally Accepted Accounting Principles (GAAP) and walked her through the relevant journal entries. Remarkably, she asked for a step-by-step walkthrough, claiming the process felt “unnecessarily complicated.” What ensued was a half-hour discussion on concepts typically covered in introductory Accounting courses.
To add to the bewilderment, she questioned why we couldn’t simply expense a new $50,000 server to maximize our tax benefits this year rather than amortizing the cost over time. When I elaborated on capitalization thresholds and the distinction between assets and expenses, she suggested consulting with our tax advisor because this approach “didn’t seem right” to her.
As if this wasn’t unsettling enough, she is expected to review our financial statements for accuracy before presenting them to the board next week.
For context, our organization is a well-established manufacturing company generating $15 million in revenue—not a startup where one might expect a less rigorous understanding of accounting principles.
Furthermore, she also expressed confusion about why our cash flow statement didn’t align with the Profit and Loss statement, failing to grasp that net income is not synonymous with cash flow.
This experience has left me questioning how someone with two decades of financial experience could lack such fundamental knowledge. It raises concerns: Has she been coasting by in positions where others managed the
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