I think the reason why people feel intimidated by it is because they somehow think FSA means accounting when in fact most accountants hardly know what ROE is. FSA is a crucial part of analysing a company and its quite easy to master as long as you know what the 3 main types of financial statements are and how they are related to each other. Once you understand the financials, the ratios, IFRS/GAAP crap, etc will all make sense just my two cents… now carry on whatever it was that you were doing
Dont know about everyone else, but I do relate it to accounting most of the time, maybe because when I did A/O-Level, this is what we called accounting, including the ratio analysis. With respect to the CFA material, most of the FSA stuff is related to accounting treatment of leases or assets/liabilities or taxes or whatever. Of course, you are looking at it from the perspective of an analyst, and the material is not really accounting per se
Because most of FSA is just making a number fit a rule, which is what accounting is.
Uh, if you go to a university, the Financial Statement Analysis courses are always under accounting courses, never finance.
I’d say it’s because the financial statements start with the stuff that is produced by accountants (Balance Sheet, Income Statement, Cash Flow Statement). I was surprised to learn that most of the ratios and a lot of the other analysis that goes into FSA is new to many accountants.
bchadwick Wrote: ------------------------------------------------------- > I’d say it’s because the financial statements > start with the stuff that is produced by > accountants (Balance Sheet, Income Statement, Cash > Flow Statement). I was surprised to learn that > most of the ratios and a lot of the other analysis > that goes into FSA is new to many accountants. exactly an accountant could careless about the ratios. He is forever stuck in the world of debits and credits. Its the finance guys that even both calculating these ratios (which are usually used to make investment decisions anyway)
sundusg_ Wrote: ------------------------------------------------------- > Dont know about everyone else, but I do relate it > to accounting most of the time, maybe because when > I did A/O-Level, this is what we called > accounting, including the ratio analysis. > > With respect to the CFA material, most of the FSA > stuff is related to accounting treatment of leases > or assets/liabilities or taxes or whatever. Of > course, you are looking at it from the perspective > of an analyst, and the material is not really > accounting per se I think the accounting treatment for operating/capital leases is important to understand the true liabilities of a company and thats more important to a financial analyst not an accountant We need to know the difference because it affects the way one values a company. Accounting would be more like if I enter into a operating leases what do I debit and what do I credit. The CFA doesn’t worry about that.
the accountant needs to worry about that too. thats where accounting fraud comes from. the accountant is THE guy who knows how to manipulate financial statements, and he should, by definition, know the effects of this over that. i mean, not for the specific reason to commit fraud, but if you are preparing the financial statements, you dont just do the debits and credits without thinking or knowing about what chain effects the debits/credits will have.
sundusg_ Wrote: ------------------------------------------------------- > the accountant needs to worry about that too. > thats where accounting fraud comes from. the > accountant is THE guy who knows how to manipulate > financial statements, and he should, by > definition, know the effects of this over that. i > mean, not for the specific reason to commit fraud, > but if you are preparing the financial statements, > you dont just do the debits and credits without > thinking or knowing about what chain effects the > debits/credits will have. Accounting fraud is usally caused by management not the accountants. Like I said they only care about the debits/credits.
so the management is supposed to be an expert on understating expenses and overstating profits and what not to, say, meet debt covenants? they need the accountants to do it for them
Here is my 2 cents: FSA is not accounting period! Accountants prepare financial statements… FSA is about analyzing financial statements. Just my POV!
BTW folks. It used to be FSA. Now its FRA. It has gone from financial statement analysis to financial reporting and analysis.
beatthecfa Wrote: ------------------------------------------------------- > BTW folks. It used to be FSA. Now its FRA. > > It has gone from financial statement analysis to > financial reporting and analysis. Ah, that makes sense. I was thinking “wow, they put Forward Rate Agreements all over the curriculum again, I’d thought they’d taken that stuff out.”
bchadwick Wrote: ------------------------------------------------------- > beatthecfa Wrote: > -------------------------------------------------- > ----- > > BTW folks. It used to be FSA. Now its FRA. > > > > It has gone from financial statement analysis > to > > financial reporting and analysis. > > > Ah, that makes sense. I was thinking “wow, they > put Forward Rate Agreements all over the > curriculum again, I’d thought they’d taken that > stuff out.” LOL investragy, i agree that accounting and analysis of financial statements are two different things. but you need to be familiar with one to be good at the other, which is why the teachings for both cover alot of similar material. theres a bit of a grey area here.
sundusg_ Wrote: ------------------------------------------------------- > so the management is supposed to be an expert on > understating expenses and overstating profits and > what not to, say, meet debt covenants? they need > the accountants to do it for them actually yes they are Enron scandal was a product of Jeff Skilling and Kenneth Lay not the accountants. They just did what these guys told them to do. You are thinking too highly of accountants. They are like what pharmacists are in the healtcare world, pill counters. They think they are as valuable as a doctor but we all know they are worthless. I guess the only reason their salaries are so high is to prevent them from selling the expensive prescriptions illegally on the street.
as a licensed CPA, if you guys think “accountants” just sit there and credit cash and debit accounts payable, you have no idea. Maybe if you’re some guy that makes $40 grand a year and never got certified, fine, you’ll do that boring stuff. But there is a LOT of decision making required in how to account for certain matters, such as securitizations, derivative instruments, etc. And we know that different choices have significant material impacts on the financial statements. And to say that accountants never heard of these ratios is also nuts. Before those statements are going to the public, they should be analyzed internally a million times. If you have ratios that are out of whack, you better be able to explain it and understand why. There’s whole chunks on the CPA exam that have ratio analysis.
And the Enron fraud was being done mostly by CFO Andy Fastow. The guy was an evil genius, really.
20% of my Intro to Financial Accounting class was all ratios. We had to know like 30 of them and we were just given a balance sheet, income statement, cash flows, oci and we had to rock em out. FRA is to accounting what reading is to writing.
Zero bonus: Quite a bit of hate for the accountants, huh? Were you shat upon by some CPA recently? A review or audit requires that the accountant perform analytical procedures as a way of “testing” the quality of the numbers. Those procedures include ratio analysis. I am not sure where you get your abhorrence toward the accounting profession, but learn a bit about it before you rant.
Most companies CFOs have CPA not CFA