Technical Accounting (#331)
/The Nature of Technical Accounting
What is technical accounting? A good way to look at this is to separate the general area of accounting expertise into two parts, where the base layer is basic bookkeeping, such as transactional activities like processing payables and payroll. Basically, the type of accounting knowledge that you can pick up from a principles of accounting textbook. Everything above that base layer is technical accounting, especially when you put in the effort to be a seriously high-end expert.
The concept usually applies to financial accounting, like knowing all the accounting standards – in detail – for things like derivatives, or leases, or pensions. But, it can also apply to a deep knowledge of the operational side of accounting, such as being an absolute expert in closing the books, or maintaining a really superlative inventory tracking system.
The concept of technical accounting is really important, even though you may never have heard the term before. It’s because this is where you add value to the organization – by being an expert. And by being an expert, you’ll be recognized for your work, and are more likely to be promoted, and just more visible than someone who doesn’t make the effort to elevate their skills.
You might think that being an expert in every possible area of technical accounting is the way to be recognized within the organization even more, but that’s not really the case. The trouble is that some of these areas can require enormous amounts of time to really learn in detail, so if you try to spread your time across multiple areas, you’ll never be an expert in any one of them.
How to Select a Technical Accounting Field
Which leads to the question of figuring out which technical accounting area you want to jump into. There are a couple of ways to look at it. One, and really the most important one, is simply whether you like the topic. If you really like accounting for derivatives, then great, go for it. If you’re like ninety-nine percent of all accountants and you’re repulsed by the idea of learning more about derivatives, then steer clear of it. Whatever you do is going to require a large time investment, so don’t spend a few thousand hours on a topic you don’t like.
This can be a problem for relatively junior-level auditors, because the audit managers and partners are always trying to force you into a certain audit area, like nonprofit auditing, so that you can be presented to clients as an expert in that area.
Well, that’s fine, but what if you don’t like the direction in which they’re pushing you? It’s best to figure that out early, and see if you can transfer to a different area.
Another view of the situation is looking at it strategically. Try to figure out what the organization really needs, and that will get you recognized, and pursue that area of expertise – as long as you like it.
For example, if your employer is an airline and it’s hedging its fuel costs, maybe you could consider learning all there is to know about the accounting for these types of hedging activities. Whereas learning about the accounting for payroll for that same airline might not get you as much recognition.
Technical Accounting Responsibilities
So if you’ve selected a technical accounting area, what does that mean? Well, if you’ve picked a financial accounting area, which is most common, then you’ll need to keep up-to-date on all new accounting standards pertaining to that topic, and know the existing standards in detail. Your knowledge should be at a level where everyone in the company comes to you for advice, and you might even be considered an expert within the industry. On top of that, you’ll be expected to represent the company’s position if the auditors bring up any issues related to your area of expertise.
On top of book learning, you’ll also be expected to prepare the policies and procedures for your area. And to train others in your area. And provide internal consulting advice. Furthermore, if the company is engaged in any accounting activities in your area that you think are a bit suspect, then you need to point out the problems and present solutions. And finally, if there’s any wiggle room in the accounting standards for how transactions should be treated, then you’re the one who’ll be expected to present the options and recommend which way to go. In short, you’re the expert.