Transcript

Meeyeon (00:13)
Welcome to another episode of What’s New at CFI. Today we are here with Jeff. It’s been a while since I’ve seen you. The last time I spoke with Ryan, I’ve been away on Mat Leave for a while. And so it really is What’s New at CFI for me. Today we’re going to talk about our latest specialization. So we want to talk about accounting for financial analysts. It’s one of our most popular, most watched topics at CFI. And so tell us about this new specialization.

Who’s it for?

Jeff Schmidt (00:45)
Sure, so it is our newest specialization, again, called Accounting for Financial Analysts. It’s a very hands-on and practical understanding of different accounting concepts. So basically our focus is, we want to cover the most common accounting concepts and issues that are encountered by financial analysts and how these issues

impact financial statements and analysis and valuation even so one thing that’s important is We really cover these concepts at a high level but this is not a replacement for any sort of traditional accounting degree

We do get into some technicalities, but it by necessity it can’t and won’t be as deep or as technical as actually getting an accounting degree. When you take the specialization, you won’t automatically become a certified public accountant or a chartered accountant but again, there are a lot of issues that financial analysts encounter and that need to be aware of, especially when they’re building a model or analyzing companies

especially across different jurisdictions because there’s different accounting standards that apply.

Meeyeon (02:08)
And so then let’s talk a little bit more about the curriculum that we have for this specialization.

Jeff Schmidt (02:13)
Sure. So, we start with Accounting Fundamentals, which is one of our most popular courses here at CFI. Yeah, exactly. I’ve taken it too. And we start with very basic concepts like debits and credits, and we cover the three main financial statements: the income statement, the balance sheet, and the cash flow statement.

Meeyeon (02:20)
Getting that, too.

Jeff Schmidt (02:34)
We then move on to reading financial statements and we use real companies we pull real company annual reports and we go through them and illustrate how they’re laid out, how to find information, and then we cover

financial analysis, where we calculate some of your most common ratios, return on equity, margin analysis, liquidity analysis, capital structure analysis, things of that nature.

Then we also actually have as part of this specialization two courses that cover analyzing bank financial statements and insurance company finance statements and the reason why we single those out is that banks and insurance companies are financial institutions and their accounting is going to be really really pretty different compared to any regular

ordinary companies that you might think of, like Nike or something like that financial institutions kind of

Meeyeon (03:38)
Yeah, it’s going be very different what they use to earn their actual income than, you know, like a P&G or Nike.

Jeff Schmidt (03:42)
Exactly, yeah. They and it’s a little, it, first, it was a little counterintuitive. But because it’s so specialized, we decided to do two courses on that. We also cover accounting for mergers and acquisitions, and this is a big deal. When you’re building an &A model, you really have to understand the accounting pretty well,

because you typically evaluate mergers and acquisitions using accretion, dilution, and earnings per share. And you usually build a pro forma balance sheet. And so we have a course that goes through an entire pro forma balance sheet. There’s multiple different exercises and things that you encounter. It’s part of that. There’s also a course on, okay, what if you buy greater than 50% of a company, but less than 100%?

And the accounting quirks that come with that and then what happens if you buy between 20% and 50% of a company. So you don’t technically have control but you have influence. So we have a course on business combinations and other equity investments as well. it’s really important to understand those concepts, especially if you’re interested or working in mergers and acquisitions because you really have to know the accounting in order to properly model it

out. And then we also have some other courses on accounting for inventory. There’s different ways you can do that and some are allowed in the United States and some are not

allowed elsewhere. We have accounting for leases again. There’s some there’s some quirkiness with our accounting rules. I think we also get into diluted shares outstanding, how to calculate that, and then we also have normalizing income statements, so looking for nonrecurring items and adjusting an income statement for them. So it’s a lot of stuff.

Meeyeon (05:46)
And it’s great to know that this is all applied in like real company financial statements because half the battle is learning how to read financial statements regardless of what the company is because everything’s going to look different. They’ll ultimately be required to share the same type of information with their shareholders, but half the battle is just learning how to read different income statements, cash flows, and whatnot. So it’s great to be applied and to get a flavor of what you’re going to see in real life instead of something that’s like made up for

Jeff Schmidt (05:50)
Yes.

Meeyeon (06:15)
specific educational purposes.

Jeff Schmidt (06:17)
Exactly. And also how to do it efficiently. You don’t have to read every single thing that a company publishes. So we do teach some efficiency tricks, like how to quickly search through a filing. So in the US for…

Meeyeon (06:20)
Yeah.

Yeah, and that would be super handy and very applied and just skills that you need for every day.

Jeff Schmidt (06:37)
So I’m based in the US, so just real quick, when you download a 10K, which is the annual report in the US, you always go, section seven is always the management discussion analysis, and then section eight should be the financial statements, and then after that, you have your footnotes.

Meeyeon (06:56)
And speaking of jurisdictions, is the whole curriculum focused just on US GAAP?

Jeff Schmidt (07:02)
No, no, no, not at all. We cover both US GAAP, so generally accepted accounting principles, and we cover IFRS, International Financial Reporting Standards. So the rest of the world basically uses IFRS, and the US has to be a little difficult, of course. I’m based in the US, I’m an American, so I can say these things.

Meeyeon (07:10)
Mm-hmm.

As always, just kidding.

Jeff Schmidt (07:28)
But we always have to be a little different. There’s a lot of similarities between US GAAP and IFRS, but there are some large differences. just as a real quick example, and we talk about this in our inventory course, there’s an inventory methodology known as LIFO, last in first out, and that’s allowed under US GAAP, but it’s not allowed under IFRS.

So, if you’re comparing a company in the US that uses LIFO to account for their inventory, but it’s not allowed in Europe, it’s hard to compare, say, a European company with the US company because LIFO is not allowed in Europe. So, yeah.

Meeyeon (08:16)
So, we’ll dive deeper into those once we take the specialization. But as we get there, should a learner, this is going to be a very common question that we encounter, but should a learner take the FMVA first before going into this type of specialization?

Jeff Schmidt (08:20)
Exactly.

Really great question. Ultimately, it really, really depends on the learner and what they prefer. I’m probably biased as an instructor and already have a lot of education and work experience. I probably, if I was taking CFI, I probably would have done the FMVA first, then the accounting specialization, but I can…

I can argue the exact opposite. financial analysts and professionals, they really need a solid understanding of accounting in order to analyze companies, build models, and even value companies. And so I can make the argument that taking the accounting specialization first might prepare learners better

to then take the FMVA because it will help with your modeling and your analysis and your valuation. Ultimately, it’s a really, really tough call and it’s up to the learners.

Meeyeon (09:42)
Yeah, so based on if, like, for everyone that’s listening based on whether you have a generalist arts degree, or maybe you have a business background, and you’ve already been in the industry for a while, it’ll be personal preference. But regardless, those, the two are very complimentary. But ultimately, when this question comes up, should I take the FMVA first? It’ll be like, it’s really up to you to take a peek first, see what you think that if you,

if you want to go and take the FMVA and you go through the courses and you think I need a little bit more focus on accounting before I can really understand everything, maybe try the specialization first. But ultimately, they’re very complimentary. Okay, amazing.

Jeff Schmidt (10:19)
Yep, absolutely. And we say this in some of our courses, but accounting is really the language of business. So, you have to understand that language in order to actually apply it. But it can be challenging if you’re new to accounting.

Meeyeon (10:38)
Yeah, as all as I have personally experienced, I remember way back in first year university, that accounting 101 course, that was one of the toughest courses I’ve had. But hey, like it really, I could say in hindsight, like it really is about learning the language of business. And without that, it’s going to be very challenging.

And so I’m really excited for this specialization to be brought out. And hopefully it will gain just as much traction as all of our other accounting courses. And for now, we will see you and everyone else next time.

Jeff Schmidt (11:06)
Great, thanks.