Title: A Surprising Encounter: When Basic Accounting Principles Leave a New finance Director Puzzled
Recently, our company welcomed a new finance Director, a move that many of us deemed a significant step forward for our financial management team. With over 20 years of corporate finance experience, a prestigious MBA, and a background at one of the Big Four Accounting firms, her resume certainly suggested she was more than qualified for the role. However, my initial enthusiasm has been met with some unexpected surprises during our day-to-day interactions.
About six weeks into her tenure, while guiding her through our monthly closing procedures, she posed a question that left me momentarily speechless. She inquired why we spent money on depreciation each month when, in her view, we weren’t actually incurring any new expenses. Initially, I suspected she was testing my knowledge on the subject, but that wasn’t the case. I explained that depreciation serves to allocate the cost of tangible assets over their estimated useful lives, matching expenses with the revenues they help generate. Despite my explanation, she appeared confused and remarked, “But we already paid for the equipment. Why are we Accounting for it again?”
As I referred to Generally Accepted Accounting Principles (GAAP) and demonstrated the relevant journal entries, she requested a detailed step-by-step walk-through, commenting that the process seemed unnecessarily complex. I found myself spending 30 minutes covering core concepts typically found in introductory accounting courses.
Later in our discussion, she questioned the rationale behind not expensing a newly acquired $50K server immediately to take advantage of a tax write-off. I explained capitalization thresholds and the distinction between capital assets and operational expenses. Her response? A suggestion that we consult our tax advisor because, in her opinion, our approach didn’t seem correct.
To top it all off, just yesterday, she expressed confusion regarding why our cash flow statement didn’t align with the Profit and Loss (P&L) statement. She struggled to grasp that net income is not synonymous with cash flow, further deepening my sense of incredulity.
As someone who has been in the field for years, I find myself questioning how a professional with such an extensive background could overlook these fundamental principles. It raises red flags—either she has been in positions where the foundational work was handled by others, or there’s more to her qualifications than meets the eye.
For context, our company generates around $15 million in revenue and operates in the manufacturing sector—a landscape where precise accounting practices are not
No responses yet