Academic Corner

College Accounting Club Recap: Information on CMA and CPA Exams

December 27, 2012, by No comments yet

Written By Guest Blogger Jason S.

Greetings.
If you have been following some of my blogs, you will know that I’m an Assistant Professor of Accounting. Just the other day, I gave two speeches to my classes about Gleim products. The first speech I gave was to my Cost Accounting class. I brought my computer to class and we did problems on process costing. We were learning process costing (Weighted-average and FIFO method) in the book, and I thought it would be good for the students to see problems directly from the Gleim Test Prep software. Most of my students had never seen one of these software packages for the CPA/CMA exam. The students in my class really enjoyed getting to see some test prep questions, and I think I may have calmed some of their fears about what was in these study systems. The students were able to use the knowledge they learned in class and from the required class textbook to answer questions in the test prep software regarding FIFO and the weighted average method of process costing.

Later that day, I gave a speech and a demonstration to the college Accounting Club about both the CPA and CMA exams. I gave demonstrations to the club using both the Gleim CPA and CMA exam systems. I was able to show them the book material as well as the test prep questions. Again, I think I was able to calm some fears and highlight the real benefits of taking (and passing) the CPA or CMA exam. I was able to talk about the potential costs of purchasing various study materials, costs of exams, taking the exams at a testing center and the estimated return on investment of passing these exams. During this whole process, I was able to use Gleim materials and give examples of how I’ve used the Gleim materials to help me study for the CMA exam.

I would also like to thank Gleim for providing the college I work at with a free set of CPA books and one free download of the test prep software for one computer in our computer lab. Students have already been able to use the software and practice questions that are similar to actual CPA exam questions. If there are any professors out there reading this, I would highly recommend signing up for the Academic Site License Program.

 

Are you ready? Defined Benefit Pension Plans Are In The News And On Exams!

October 25, 2012, by No comments yet

 

Written By Guest Blogger Dom Savini.  Read his bio here.

 

With the recent talk about cities declaring bankruptcy, governors squaring-off with labor unions, and GASB’s new pension standards[1], people are paying more attention to how defined benefit pension plans may be contributing to these events. Needless to say, whether you are a CPA, or CIA candidate, you must be prepared to address the accounting and financial reporting issues of such plans[2].

Students often struggle with remembering two very important and critical calculations: the required minimum pension expense and the pension benefit obligation (PBO). The first point I make to students is that when we talk about defined benefit pension plans, not much makes real accounting sense. This is because during FASB’s due process (during the 1980s) of the initial standard (SFAS 87, Employer’s Accounting for Pensions) there was intense “lobbying” by various constituencies with divergent views, which some commentators have said contributed to one of the most (if not the most) politicized standard the FASB has ever issued.

This leaves you in a really good position because there is very little theory for you to learn and understand. Instead, you can breathe a sigh of relief and focus your precious study time to memorizing two simple rhymes[3] that we would like to share with you:

Required minimum pension expense – “Service and interest less expectations, adjusted for amortizations.”

Here’s the standard formula: we add the service and interest costs together and then deduct the expected (not actual) return on plan assets, and then we adjust for the amortizations of (1) gains/losses and (2) prior service costs. The result is equal to the required minimum pension expense:

+ Service Cost

+ Interest Cost

- Expected return on plan assets

-/+ Amortization on net Gain or Loss

+/- Amortization of prior service cost/credit

= Pension Expense

The only tricky thing relates to the amortization of gains/losses because they seem counterintuitive but are not: (1) gains are deducted and losses are added – remember, we are calculating an expense, so gains lower the expense, whereas losses add to the expense. (2) The amortization of prior service costs is straightforward because prior service costs add to the expense, whereas prior service credits lower the expense.

Now, repeat and memorize the rhyme: “Service and interest less expectations, adjusted for amortizations.” See how easy it is? You got it now!

Pension benefit obligation (PBO) – Before we tackle the PBO, let’s get a word picture in your mind’s eye that you can identify with. Think about your favorite college pub on or off campus, maybe a sidewalk café or even a bagel shop. Okay, here’s the rhyme: “Begin at the Pub, add a SIP, pay the bartender and adjust the tip!”

Here’s the standard formula: we take the beginning PBO balance then add-in service and interest costs and prior service costs, this basically results in an up-to-date obligation amount. From this amount, we then deduct any prior service credits and benefits paid-out that help reduce our obligation. Look at it this way:

+ Beg. PBO (Begin at the Pub)

Plus: Service cost, Interest cost & Prior service cost (add a SIP)

Less: Prior service credit, benefits paid (pay the bartender)

+/- Adjusted for: changes in assumptions/experience (and adjust the tip)

= Ending PBO

Now, say it again and memorize: “Begin at the Pub, add a SIP, pay the bartender and adjust the tip!”

Okay, I will leave you with one final thought: What other profession can take a subject like pensions and make it fun? Not too many, so please work as hard and smart as you can using Gleim’s proven material and methods and you’ll be having tons of accounting fun before you know it!

 

[1] GASB Statement No. 68, Accounting and Financial Reporting for Pensions, which revises and establishes new financial reporting requirements for most governments that provide their employees with pension benefits.

 

[2] Please note that GASB pronouncements are not specifically tested on either the CPA or CMA exam and are only referred to for context.

 

[3] © EthicQuest, Llc, Springfield, Virginia. All Rights Reserved. September 2012.

 

Clarity Standards

September 20, 2012, by No comments yet

 

Written By Guest Blogger Dom Savini.  Read his bio here.

Academics, take notice! – There’s a great need regarding the AICPA’s Clarity standards. [1]

A 19th century military strategist once wrote, “Although our intellect always longs for clarity and certainty, our nature often finds uncertainty fascinating.”[2]  Needless to say, despite the AICPA’s best efforts at communicating the changes brought about by their Clarity Project, there will undoubtedly be a significant amount of “uncertainty” as the profession attempts to understand how these changes will hit home.

Unfortunately, a large portion of the profession has been quite busy responding to the ramifications brought about by the most recent financial collapse and may not have followed the Clarity Project as closely or in as much detail as they would have liked. After all, if the AICPA meets its goal to make the auditing standards “easier to read, understand, and apply” [3], what do we have to worry about? I say, plenty!

Apart from understanding the cosmetic changes and technical aspect of each redrafted document, there will be significant and profound implementation questions.

Let me highlight two significant changes – (1) the auditor’s report will require separate paragraph headings to clearly distinguish “Management’s Responsibility for the Financial Statements” versus the “Auditor’s Responsibility,” and (2) audits of group financial statements will require the auditor of the group financial statements to be involved with the component auditors.

The first change seems innocuous doesn’t it? Now, assume you are an attorney representing a client who has just filed bankruptcy and is awestruck that her CPA never told her that she was over-invested in slow-moving inventory. All of a sudden the proverbial “light-bulb” shines over the attorney’s head. Did the CPA make clear where his responsibilities began and ended? Was he clear in telling his client what her responsibilities were as opposed to his? Absent evidence to the contrary, the attorney just might want to point to this clarified standard as evidence that “things were so bad in this regard that the AICPA had to fix the problem.” Of course we know this to be an extreme example, but those of us who have experienced litigation first-hand know all too well that extreme cases seem to make for good malpractice cases against CPAs.

The second change requires the auditor of the group financial statements to be involved with the component auditors. This applies even when the component auditor works for a network firm of the group firm or for a different office of the same firm. How are smaller firms who once relied on assist audits going to now implement this clarified – or is it new – requirement? Will component auditors who might otherwise happen to be direct competitors of the group firm be compelled to divulge proprietary firm information? Will scope restrictions change and if so, how?

Now, larger firms have the resources to satisfactorily address implementation issues that will undoubtedly arise, but what about smaller firms or financial statement preparers? The same rubric that a large firm uses in conducting audits cannot be easily adopted by smaller firms. Also, the risk profile of large firms is so different from that of smaller firms it would be inappropriate for example, to do a “copy/paste” of a large firm’s audit program. When it comes to standards-setting, preparers often feel like an afterthought as one can well imagine. What additional burden can the preparer expect to carry in order to fully satisfy an auditor complying with the clarified standards? Are audit fees going to be substantially affected?

Moreover, who will help explain to investors how requiring two new sections in the audit report may reduce information risk while increasing financial statement reliability? Additionally, who will analyze the work done by regulators in light of the new clarified standards to make sure that redundancies and conflicting requirements are avoided?

Students, financial statement preparers, practitioners, investors, and regulators are all going to need insight and greater understanding to effectively and efficiently comprehend the redrafted standards.
To help answer and shall I dare say clarify the Clarity Project, I can think of no better place to communicate, assess, and address the impact than academia. I hope some of you will agree and consider this as you prepare your curriculums and research projects.

 

[1] The AICPA’s Auditing Standards Board is nearly complete with an ~8 year project to improve compliance with its GAAS requirements and to converge U.S. GAAS with international auditing standards. The goal is to improve compliance via standards that are easier to read, understand, and apply.

[2] Karl von ClausewitzKarl von Clausewitz

[3]www.aicpa.org/interestareas/frc/pages/frc.aspx dated July 2012

Is It Worth Earning More Than Just The CPA Designation?

August 24, 2012, by No comments yet

Written By Guest Blogger Mr. Dom Savini (Please see his bio)

Although the answer to this question depends on a host of matters that encompass personal and professional circumstances and aspirations, generally speaking the answer is most certainly, YES.

In a recent survey of 300 global CEO’s 76% agreed that current reporting systems are too focused on financial statements and 75% agreed that more emphasis is needed on communicating non-financial business value.[1]  Additionally, as governments face the current global economic climate they are reviewing ways to better report performance, cost accounting, and budget information to their citizenry.[2]  Lastly, standard-setters have initiated research projects that deal with improving commentary, disclosure and analysis about an organization’s financial health and operations.[3]

What does this mean to you?   Although the CPA designation has been and continues to be considered the “gold-standard”, its focus is primarily on public accounting and auditing.[4]  As such, although it is an outstanding and robust foundation and professional achievement, its current scope does not really focus on areas such as strategic cost management, governance, risk management, organizational theories and employee behavior. In fact, just read any business newspaper and you will see that these are the areas that are the root cause to many of the financial problems whether on Wall Street, Main Street, or City Hall.  Now, in order to gain this proficiency you can decide to either enter into a multi-year masters degree program paying thousands of dollars or consider taking The Gleim CMA or CIA review courses and becoming certified within a matter of months as opposed to years.

Other reasons to consider earning either the CIA or CMA designation include: securing greater advantages such as increased earnings & promotion potential, demonstrating increased level of proficiency & professionalism, meeting globalized demand for services, leveraging your existing skills across diverse disciplines, and most importantly, remaining a relevant professional in today’s highly competitive global environment.  The ball is in your court.

Footnotes:

[1] Rebooting Business: Valuing the Human Dimension,  January 2012.  AICPA and CIMA. http://www.cgma.org/Resources/Reports/Pages/rebooting-business.aspx

[2] FASAB Active Projects, Performance Reporting and Reporting of Budgetary Information in Financial Reports. http://www.fasab.gov/projects/active-projects/performance-reporting/

[3] FASB Not-for-Profit Advisory Committee Recommends Improvements to Financial Reporting, News Release 10/03/11 and IPSASB Active Project, Reporting Service Performance Information. http://www.ifac.org/public-sector/projects/reporting-service-performance-information

[4] The AICPA’s content specification outlines (CSOs) for the four sections of the Uniform CPA Exam include: Auditing & Attestation, Financial Accounting & Reporting, Regulation, and Business Environment & Concepts. http://www.aicpa.org/becomeacpa/cpaexam/examinationcontent/contentandskills/pages/default.aspx

The CMA Exam: Your Certification Should Match Your Job

June 14, 2012, by No comments yet

 

Guest Blogger Dennis Elam, PhD, CPA, Assistant Professor Accounting / Texas A & M San Antonio

Work goes much better if one has the right look matched to the right job. Life goes better that way too.

Make sure your certification matches your job description.

Accounting is no longer a-one-size-fits all profession. In response to this trend, there are now certifications to ‘fit’ specific job descriptions. Say hello to the Certified Management Accountant (CMA) designation.

Globalization and competition has ramped up the competitive environment. CMAs assist their organizations in operating on the highest efficiency frontier. CMAs employ benchmarking of best practices, Total Quality Management and Six Sigma standards, and Quality Circles to ensure the best product possible.

A significant percentage of the accounting profession is employed in industry. Yet the CPA designation is not designed for this purpose. A CMA will work with management, marketing, engineering, and accounting, perhaps all in one day. The focus of the CMA is internal best practices. He or she is internally focused on bringing a total quality product or service to market. A CPA on the other hand is often looking in the rear-view mirror. The attest function reports to users of financial information. It reflects what has happened rather than working to shape what will happen. The CMA is forward looking, working to achieve Kaizen type results for the operation. It is no surprise that CMAs are now 30,000 strong and growing in numbers.

The CMA exam has recently been revised. It now features two rather than four parts. This writer’s opinion is that the CMA has become a very practical exam by focusing on practices and studies that are actually in use. One section seems to focus on accounting while the second is more focused on finance and managerial practices. The CMA exam may be taken with a college degree. Unlike the CPA exam, 150 hours of college and over thirty hours of accounting classes are not required. Study for the exam is often supported and funded by employers for this reason.

Dennis Elam, Phd, CPA, is an Associate Professor of Accounting at Texas A & M University San Antonio. He has addressed CMA meetings to deliver Continuing Professional Education Credit. He recommends the exam to students and has led a CMA live review course. He blogs at

www.professorleam.typepad.com

www.themarketperspective.com

 

CMA Exam – Important Updates from the ICMA

March 21, 2012, by No comments yet

 

Written By Dr. Flesher, Gleim CMA Review Co-Author

 

The Institute of Certified Management Accountants rarely changes its Learning Outcome Statements (LOS), but in January, 2012, it did make a minor change. The revised LOS states that candidates taking Part 1 of the CMA Exam are responsible for sections 201 and 203 of the Sarbanes-Oxley Act of 2002. Previously, the LOS addressed only Sections 302 and 404. Below are the highlights of sections 201 and 203.

 

Section 201 lists several activities that cannot be performed on behalf of audit clients, including: It shall be unlawful for a registered public accounting firm to provide, contemporaneously with the audit, any non-audit service, including:

 

a) bookkeeping or other services related to the accounting records or financial statements of the audit client;

b) financial information systems design and implementation;

c) appraisal or valuation services, fairness opinions, or contribution-in-kind reports;

d) actuarial services;

e) internal audit outsourcing services;

f) management functions or human resources;

g) broker or dealer, investment adviser, or investment banking services;

h) legal services and expert services unrelated to the audit; and

i) any other service that the Board determines, by regulation, is impermissible.

 

Section 203 requires periodic Audit Partner Rotation. It shall be unlawful for a registered public accounting firm to provide audit services to an issuer if the lead (or coordinating) audit partner (having primary responsibility for the audit), or the audit partner responsible for reviewing the audit, has performed audit services for that issuer in each of the five previous fiscal years of that issuer.

 

For those in the middle of their studies, these updates affect Study Unit 9 of the Gleim CMA Review System.

 

The Gleim Knowledge Transfer Outlines have been revised to reflect these changes by the ICMA. The outlines found in the Gleim Online have automatically been updated. Click here for updates to your book. We have also added questions to our Test Prep Software to provide adequate coverage of the LOS updates. To update your Test Prep Software, select “test prep tools” from the main screen and then select “online update.” You must be online during this process to receive the update. To set your Test Prep to automatically check for updates, select Preferences from Tools Menu. In the General Options tab click the option you would like.

 

The CMA Exam: Do it For the Money!

February 5, 2012, by No comments yet

 

This article was written by guest blogger Dr. Flesher.

 

When you ask someone why they took the CMA Examination, the usual response is something like “I wanted the professional recognition that certification would provide” or “I thought it would boost my career.” In some cases, companies even require some form of certification before a staff accountant can be promoted to a higher level. But in the end for most CMAs, the result of obtaining the CMA certificate is MORE MONEY. Over the past 25 years, the Institute of Management Accountants (IMA) and others have published articles summarizing the salaries of CMA holders compared to individuals in similar positions who were not certified. The end result has always been that CMAs have higher salaries.

Although the results of the surveys have varied slightly over the years, the general consensus has been that CMAs and CPAs make more money than individuals who are not certified. Also, it doesn’t matter which certificate a person holds, the average is that the certified person makes about 20-25% more than a non-certified person. Thus, an accountant who is not certified is doing himself or herself a disservice by not sitting for the CMA Examination.

Suppose that you are already a CPA, does that mean you don’t need a CMA?  No way! The salary surveys mentioned above found that a CPA who later passed he CMA Exam received the benefit of the 20% salary increase. In other words,  CPA/CMA earns about 20% more than a CPA. Thus, it is better to have both  the CMA and CPA rather than either certificate alone. In addition, having the CMA in addition to another certification makes a person more hirable. If everyone in the pool is a CPA, then having a CMA makes you unique.

In summary, certification is an indicator that a person is better prepared than their coworkers, and employers, on average, are apparently willing to pay for that additional preparation. Don’t sell your career short. Take the CMA Examination and then tell everybody when you pass. It will result in more job opportunities and more money in your pocket.