How to become an accounting ace (or how to spot one).

Step up your accounting game with just 4 simple steps.

1️⃣ First, recognize the issue.

You must be able to correctly identify the topic and a relevant accounting standard/ interpretation.

Examples:

🔬 A substance for a medicine in an experimental trial stage - > research IAS 38 Intangible Assets

💊 A medicine containing the substance gets approved -> development stage IAS 38 Intangible Assets

📦 The medicine is mass produced -> inventory IAS 2 Inventories

💲 Sales proceeds from the medicine - > revenue recognition IFRS 15 Revenue from Contracts with Customers

⚖ Getting sued by a customer for a harm caused by the medicine - > liabilities/ provisions IAS 37 Provisions, Contingent Liabilities and Contingent Assets.

Only after you properly identify the subject matter, you will be able to design proper accounting treatment.

2️⃣ Be aware of traps and dig deep.

An eager proposal from a non-accountant seeking certain outcome in their books might look like this:

“Well, surely we might call a transaction in a contract “a sale of xy”, if that helps us book revenue and improve our top line, no problem with that." (there is no sale based on contractual terms).

Sounds familiar?

Here is where my favorite principle comes into play: Substance over form.

Substance is the key.

No matter how you name, dress or present any topic (= form), you must be able to see clearly an underlying item (=substance) and account for it accordingly.

3️⃣ Documentation matters - a lot.

Read the documentation on a problem to be solved - all of it.

Even if it is boring (it can be, more often than not).

Even if it is too technical.

Ask Google if you need an understanding of:

• norms and regulations,
• cryptic software names,
• stock or agricultural reports,
• legal nightmare language.

Be careful about asking AI, especially concerning factual topics.

AI is a great language tool. And it was made to please a user. Worst case, it will come with some nonsense and present it proudly as “the fact”.

Ask people too. Actually, ask relevant people (experts on the subject matter) first.

Documentation is the basis for all accounting decisions.

Flying over it or dismissing it altogether might become fatal.

You might miss a key piece of information or misunderstand the rights and obligations of parties to an agreement.

The result: wrong accounting assessment and treatment.

4️⃣ Think 3T: Time, Total (value) and Trajectory.

Does the value of an item in question matter (materiality)?

A single item or a population?

Will an issue become smaller or bigger with passing of time?

What factors influence the 3T?

➡ Cost of capital, time value, probabilities, anticipations and macro economical developments.