The Most Valuable Technical Accounting Tools
With all the recent talk of offshoring, layoffs, and a general slowdown of the economy, it's more important than ever to differentiate yourself at your public accounting firm. In my opinion, one of the best ways to do this is to learn some level of technical accounting to support your clients. Today, we are going to discuss some of my favorite technical accounting tools that have served me very well over the years. Let's jump in!
What is Technical Accounting?
If you have ever seen a company's policy or a memorandum that explains how Accounting is done in the context of GAAP, you have been exposed to technical accounting work. Technical accounting can be described as the interpretation of complex accounting standards to a client's unique situation. It's typically done with the objective of getting things right for a financial statement auditor so the client can have a clean audit opinion.
What do Technical Accountants Do?
Generally, technical accountants have the following priority of responsibilities:
Research - when a technical need arises, the technical account must do their research to see what accounting standards may apply and the frameworks they utilize for decision making.
Interpretation - Knowing the standards is A great first step, but technical accountants need to understand how those standards apply to the clients situation. It is very often the case that even a few words of client documents will fundamentally change how they are interpreted for accounting purposes. It's a technical accountant's responsibility to find the relevant language and interpret it appropriately.
Writing - once a technical accountant understands how things should be treated, it's their responsibility to convey that message with non-technical accountants. This is usually done through the use of a memorandum that outlines the relevant technical standards and how they are applicable to the company. Depending on the level of detail required, these memos can be one page or they could be more than 50 pages.
Calculations - once everything has been explained in a memo, the relevant calculations to put the numbers to paper need to be made. Sometimes, this is a relatively simple math problem, while at other times it might be a spreadsheet with hundreds of columns and dozens of tabs.
What Tools Do Technical Accountants Use?
A lot of the unique work that technical accountants do lies in that first step of research. The most helpful tools in the technical accountant’s toolbox will help make that research process as painless as possible. Here are the three most useful tools I use when doing technical accounting in my day-to-day role:
The FASB Codification - if you're doing a serious level of technical accounting, you should have access to the FASB codification. In most circumstances, this is provided by a subscription service like Thompson Reuters Checkpoint. Having the actual rules at your disposal for your reading pleasure is essential to performing technical research.
Firm Practice Aids and Guides - most of the top 10 firms have departments dedicated to technical accounting, research and interpretation. As the leading firms in the industry, they will create large guides that you can download to help you interpret the FASB codification. These guides can cover a variety of topics, from a single large accounting standard like ASC 842 to a specific instrument that might require the interpretation of multiple accounting standards like profits interest units. Most technical accountants have a folder on their computer with dozens of these PDFs downloaded for reference.
Experience - A lot of technical accounting involves taking a fact pattern and applying it to the rules outlined in the FASB codification while considering any relevant scope, exceptions, and materiality considerations. The best thing that a technical accountant can say is “I've seen this before” because that means that they know exactly where to look and might even have the memo already drafted because a different client went through a similar problem. But experience isn't just about saving time on paperwork, it's also about having experience dealing with questions from auditors regarding the interpretations made. In many cases, technical accounting involves judgment and interpretation of issues where more than one outcome could be argued successfully. The experience of having those conversations with auditors and knowing what issues are important to them and how they tend to interpret the codification is incredibly valuable when providing technical accounting services to clients. Regardless of your experience, it's always a good idea to ask your team members if they have seen a certain technical issue before so you can leverage their experience if needed.
The world of technical accounting can be daunting at first. But once you understand the tools and the methodologies, you will be amazed at how technical you can be! If you are at all interested in technical accounting, give it a shot!