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Feb 28
2011

Longer tenured CFOs make fewer accounting transition errors

Posted by dbedell in Untagged 

dbedell

Age and experience may indeed breed wisdom, at least as far as CFOs and accounting go.

This is one of the findings of a study done in Australia looking at how well companies manage the shift from national accounting rules to adopting International Financial Reporting Standards (IFRS).

The study, by US and Australian academics Anna Loyeung, Zoltan Matolcsy, Joseph Weber and Peter Wells, highlighted success factors and problem areas for CFOs in making the shift. Australia officially adopted IFRS in 2005.

By examining the causes and consequences of errors in adoption during an accounting standards transition, the authors hoped to provide some information to help companies and governing bodies reduce errors and costs when in transition or making major accounting standards changes.

The results were quite illuminating. First off, as one would expect CFOs with some sort of CA or CPA designation made fewer mistakes. They also found that the longer a CFO was at a company, the smoother transition went. Having a CFO that knows the ins and outs of the company is associated with less errors – so more years of wisdom and experience lead to fewer mistakes.

Plus, taking more time with adoption of new accounting standards may be the best course of action in the long run for companies, as early adopters not only had more mistakes, but also had greater costs associated with adoption. It may be that the early adopters pave the way to a smoother transition by dealing with – and providing insight into -- bumps in the road.

The abstract for the study can be found here.

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