Accounting Principles Second Canadian Edition Answers

[Margarita Lovvorn]

Atthe top if the CFO. Finance Director/VP of Finance is essentially the same role, however if you have a VP of Fin, but need a strategic person at the same level (or a little higher) then you have the CFO.

Wayne thanks for the answer. The role for this person would be between the CEO and the Finance Manager. The question really is, if the belief is the company is to small to have a CFO, is Finance Director a high enough title to get someone above the Controller level or is a Controller perceived as higher and they need to make the position a true CFO position?

It's great for making your case in performance reviews or promotion or increased compensation, finding new career paths, finding skills gaps to fill in, etc. or even just getting an idea of the required skills in various job titles.

I believe Wayne's answer gets to that point. VP Finance would typically be seen as above a Controller. I have been in the same role in multiple smaller companies and have had each of the titles. Good luck.

Where did it say the position title was VP of Finance? I think the person was saying Finance Director or Controller, which was higher in rank? His question does make me want to ask a question. Is there a difference in Finance Director or Director of Finance?

This is a tricky question. CFO is clearly the top title. Finance Director and Controller positions are often paid about the same, all else being equal, and the titles are often used interchangeably, and often incorrectly. In my experience, Finance Director is often used when the Controller title would really be more appropriate. This is the case when the incumbent's primary responsibilities are accounting. Both roles can exist in the same company. First and foremost, the Controller is the chief accountant. Depending on the complexity of the accounting processes and policies applicable to the organization, it is possible that a "heavy hitter" may be needed in the Controller position, and that may necessitate paying much more for that role than for the Finance Director who might be sitting in the office next door. Conversely, if the complexity of the finance functions warrant a heavy hitter in that role -- say, if there's a lot of financing or M&A activity going on, lots of strategic planning, maybe foreign currency hedging, significant risk management -- then the company may have to pay up for the Finance Director. It all depends.

Below are the job definitions from salary.com. For reasons stated above, I disagree somewhat with including overseeing the accounting function as a role of the Finance Director. If the accounting is pretty simple, then sure, the Finance Director can oversee an Accounting Manager. Otherwise, though, accounting belongs to the Controller.

Finance Director:

Directs an organization's financial policies. Oversees all financial functions including accounting, budget, credit, insurance, tax, and treasury. Typically represents the 2nd most senior finance executive. Typically requires an advanced degree with at least 10 years of experience in the field. Familiar with a variety of the field's concepts, practices, and procedures. Relies on extensive experience and judgment to plan and accomplish goals. Performs a variety of tasks. Leads and directs the work of others. A wide degree of creativity and latitude is expected. Typically reports to top management.

Controller:

Responsible for directing an organization's accounting functions. These functions include establishing and maintaining the organization's accounting principles, practices, procedures, and initiatives. Prepares financial reports and presents findings and recommendations to top management. Requires a bachelor's degree and at least 15 years of direct experience in the field. Typically requires a CPA. Demonstrates expertise in a variety of the field's concepts, practices, and procedures. Relies on extensive experience and judgment to plan and accomplish goals. Performs a variety of tasks. Leads and directs the work of others. A wide degree of creativity and latitude is expected. Typically reports to top financial officer or CEO.

I think the answer to this depends on what is meant by "he wants to get a more rounded individual". I'd agree that at a smaller company Controller is primarily concerned with ensuring the accounting is timely, accurate, and can be used to meaningful effect by upper-management. Has to be compliance minded, which even though a person can be a senior finance professional is not always an aptitude. I view "Finance Director" as more suggestive of a strategic bent and workings with external parties (customers, banks, investors).

It really depends on what this person is supposed to do? As Patrick says these titles are being used for many different purposes so instead of defining the job by the title start by defining it by the responsibilities.

Also ask the question what does the CEO need? A beancounter or a business partner? Although the comparison is too simplified I would tend to put the controller in the first bucket and the finance director in the second.

Anders took the words out of my mouth. I don't think the size of the company matters; it's about the needs of the company and position. As Patrick points out, review the job description of each and make the appropriate decision from factual data.

People often like to think of the Controller role as being a gateway to the CFO role. This can be true, but not necessarily. In a strict sense, and especially in large companies, the Controller needs to be an accounting guru. This can make that person a bit one-dimensional, however. The CFO role requires a much broader skill set. So, being a successful CPA (BTW, a great prerequisite for a Controller) and/or Controller can lead one to an overconfidence that may not serve that person well if they move into a CFO role.

The flipside is that being a solid CFO does not necessarily qualify such a person to oversee the accounting function. In an organization that has complex accounting, the CFO needs to be humble and hire a strong Controller, preferably with a CPA background, to handle accounting and external reporting.

I've seen a lot of Controllers and CFOs get themselves into trouble by not understanding the differences in the roles. I will say, though, that in smaller organizations you can often find strong Controllers who are capable of going it alone without a CFO being in the organization. They are often able to broaden out over time and handle a lot of the typical CFO tasks that come up, which don't tend to be overly complex in a small organization anyway. In such organizations, its usually most important to the business to put a primary focus on a smooth running accounting organization; hence, the importance of having a solid Controller. Take care in such organizations to not put a Finance Director in charge of accounting who does not have a solid background in accounting. Someone with a finance degree, for example, is going to have a struggle when going it alone as the top accountant. Controller is not a job you can fake.

So, from what I am reading here, and what I already thought. Let's look at the organization of a small company. It seemed kindof strange to me, so I love to know your thoughts. The finance organization was as such (in pecking order):

CEO

CFO/COO

Director of Finance

Controller

Accounting Manager

Payroll Analyst AR Analyst AP Analyst

Accounting Assistant/Generalist

In my Company, Finance Director is a level and Finance Controller is a title. Finance Controller is taking care of accounting while we have a FP&A Director taking care of business partner. Above all, we have a CFO/VP Finance taking overall Finance and Accounting.

The Statutory Accounting Principles (E) Working Group is responsible for developing and adopting substantive, nonsubstantive and interpretation revisions to the NAIC Accounting Practices and Procedures Manual (AP&P Manual). The AP&P Manual provides the basis for insurers to prepare financial statements for financial regulation purposes.

Substantive statutory accounting revisions introduce original or modified accounting principles. Substantive revisions can be reflected in an existing Statement of Statutory Accounting Principles (SSAP) or a new SSAP. Nonsubstantive statutory accounting revisions are characterized as language clarifications that do not modify the original intent of a SSAP. SSAPs are considered the highest authority (Level 1) in the statutory accounting hierarchy.

An interpretation to an existing SSAP may be developed to provide timely application, interpretation or clarification guidance. Revisions classified as an interpretation shall not amend, supersede or conflict with existing, effective SSAPs. Interpretations are considered the second highest authority (Level 2) in the statutory accounting hierarchy.

SAPWG Maintenance Agenda Submission Form (Form A)

See the NAIC Policy Statement on Statutory Accounting Principles Maintenance Agenda Process for description and instruction. After completion of the Form A, please send to NAIC staff via email for review (see NAIC contact information below). NAIC staff will send a confirmation of receipt. In order for NAIC staff to place the Form A on the Agenda, it must be received no later than the comment deadline.

Committee and Task Force Minutes PDFs will be posted to the Interactive Agenda Approx. 10 days after the conclusion of a National Meeting. They are posted to the interactive agenda for each meeting tab on the meetings page. The Proceedings of the NAIC are made available after the minutes are adopted at each subsequent meeting and may be accessed via the NAIC Publications page.

On a non-GAAP basis, excluding the impact of a charge in the fourthquarter of 2006 related to the company's organizational realignment and thenegative incremental impact of adopting Statement of Financial AccountingStandards No. 123R, "Share-Based Payment" ("SFAS 123R") on January 1, 2006,net income grew to $67.8 million, up 8 percent, and EPS rose to $0.53, a 12percent increase from the fourth quarter of 2005. See the reconciliations ofnon-GAAP financial measures to the comparable GAAP financial measures attachedto this earnings release for additional information.

3a8082e126