Navigating the Unlikely: A New finance Director’s Surprising Knowledge Gap

Recently, our organization welcomed a new finance Director with what appeared to be an impressive background: over 20 years of corporate finance experience, a history at a prestigious Big 4 firm, and an MBA from a well-regarded institution. As a senior accountant who reports directly to her, I was eager to collaborate and uphold the financial integrity of our growing company.

However, a recent experience during our monthly closing process left me both bewildered and concerned. My Finance Director posed what I initially assumed was a rhetorical question about depreciation, labeling it a “waste of money” each month since, in her view, we weren’t actually spending anything at that time.

My first instinct was to offer a nuanced explanation of how depreciation serves to allocate the cost of assets over their useful lives. This principle helps us to synchronize expenses with the periods where the asset generates value. Unfortunately, rather than gaining clarity, she stared back at me, perplexed by the idea that we were “expensing something again” after already purchasing the equipment.

I attempted to clarify the foundational concepts of Generally Accepted Accounting Principles (GAAP) and provided detailed journal entries for reference. Yet, her response revealed a lack of familiarity with these basic principles, as she asked for an exhaustive step-by-step breakdown, insisting that the process seemed overly complicated.

The conversation took another surprising turn when she inquired about expensing our recently purchased $50,000 server in order to reap the immediate tax benefits, rather than spreading the cost over several periods. When I mentioned the importance of capitalization thresholds and the distinction between an asset and an expense, she suggested that we should consult with our tax advisor, indicating her skepticism about the usual practice.

What truly struck me was the unfortunate reality that she is responsible for reviewing our financial statements for accuracy before they are presented to the board next week. For context, we are a manufacturing company generating $15 million in revenue—not a small startup where you might expect a more relaxed approach to Accounting.

To add to the confusion, she expressed her bewilderment as to why our cash flow statement did not align with the profit and loss statement. This prompted yet another fundamental explanation, emphasizing that net income and cash flow are indeed two distinct measures.

Reflecting on this series of events, I find myself questioning how someone with two decades of finance experience could lack such foundational knowledge. It raises critical concerns about whether her previous roles may have been