The "Big Zero"

Paul Krugman refers to the past decade as the "Big Zero". It was a decade of zero gains for job creation, household income, home values, stocks and economic progress in general. And accounting was a big part of the problem. See Paul's column for the complete article.

Another good explanation for the CMA format change

Jim,

I am currently on the ICMA board and wanted to respond to your comment on the listserv privately. My first thought about the new CMA exam was exactly the same as yours. The popular perception seems to be that the rigor has decreased along with the length of the exam. However, I do not believe this to be true...and I have seen the evidence first hand that supports this conclusion.

The new exam does not cover the breadth that it did in the past, but I believe that is a good thing. The management accounting focus is much greater now than in the past. Previously there was a lot of ancillary information that was only marginally attributable to the core focus of management accounting. In fact, there was quite a bit of focus on external reporting, which I honestly think should not have ever been there. That content was removed. Economics, although useful from a basic background level, is not a focus that I try to stay current on. Moreover, testing on the information systems content was never very useful in my view since the technology changes so rapidly. These were areas that were just necessary to plow through and mostly forget about for me. At any rate, I am much happier that the focus is on core management accounting skills now.

Another feature of the new exam is that the rigor has been "increased." Yes, although the content (in terms of volume) has been reduced, the level of testing of the essential management accounting content has increased in depth and difficulty level. So I had to ask myself which approach I would rather see...more depth in core MA areas with less or no emphasis on economics, IT, and external reporting...or lower rigor (i.e. what we have now) but more breadth? Personally, I think the former is better than the latter.

From my view, the new CMA exam is all about keeping the main thing the main thing. This is important from my view. I am also aware of the fact that perception is reality. So, from that perspective, time will tell if the change was a good idea. For my part, I believe it was. Everyone is entitled to their own opinion of course, but I wanted to just share my personal view that I believe the change will be beneficial to the profession rather than detrimental.

My very best regards,
Doug

Larry White's explanation related to the new CMA format

The following is a response from Larry White to my comments about the new CMA format. My response follows Larry's comments.

Dear James, I saw your comments on the revised CMA exam on Linked Up IMA and wanted to share my thoughts as a member of the Committee that developed the concept for the revised CMA Exam. First, I wanted to say how much I admire and appreciate all you do for the profession through MAAW. You set the standard in embracing and distributing new information and ideas within the profession. The problem IMA faced was the CMA Exam wasn't drawing the US market. Unfortunately, US accounting education is overwhelmingly CPA focused. IMA needed to attach accountants and financially oriented professionals to management accounting. However, management accounting suffers from a professional recognition problem......no one defines them self as a management accountant in business today...its all called "finance". We concluded that we needed to focus the CMA on a body of knowledge needed by the CFO organization, but not well addressed by a CPA curriculum, and MBA curriculum, or a combination of CPA and MBA.....but that were critical to the CFO. What we observed was the rise of a group within the CFO office that did "Financial Planning & Analysis" or FPA. It was not a purely accountant staffed domain. We found parallels in government - Budget, Planning, and Program Analysis. Based on this observation IMA did fairly extensive market research - focus groups, CFO interviews exposing the concept, etc. We also found achievability was an issue, particularly when many of the CMA candidates are not entry level, but into their career - early to mid. They didn't want to waste time on basic knowledge topics. IMA, of course, wanted to keep the CMA exam rigorous and high quality. The conclusion was to narrow the topical focus to key topics that differentiated Management Accounting and test every topic to great depth. The exam now assumes the candidate has basic undergraduate financial and cost accounting (for financial reporting) knowledge, as well as a number of other topics in business. I believe it focuses on the key differentiators in today's management accounting practice for people working inside companies, and it will provide a quality certification that provides skills and knowledge CFO's want their people to have. I know the reduction in parts sounds like a diminishment, but the CMA really isn't being used as an entry level certification any longer. Unfortunately, the CPA and MBA are the bodies of knowledge being hired. However, CFO's are finding problems with the lack of management accounting knowledge...most MBA programs have dropped their management accounting course and most undergraduate accounting curricula only teach enough management accounting to get students past the CPA exam. I'm confident the new exam will only certify individuals that have the knowledge and ability required of the old exam, but by being more focused, it will also promote the core differentiating skill sets of management accounting. I hope this short summary helps you understand and respect what the IMA has done with the revision to the CMA. The support of key professional mavens like you is very important to keeping the profession of management accounting alive and vital. Thanks for reading this and all you do on MAAW. Larry R. White, CMA, CFM, CPA, CGFM

My response:

Larry, Thanks for helping me understand the changes. Your explanation of the new CMA format sounds much more convincing than most of the arguments I have seen. I realize that academic folks like me are frequently out of the loop, so I will shut up and take a wait and see approach. I really hope the new plan works.

The effect of the change to the CMA Exam

According to Brausch and Whitney (Strategic Finance, December 2009, p. 9) the changes to the CMA exam are intended to dramatically increase the value of the CMA in the market.

Beginning in the spring of 2010 the exam will include only two four-hour exams, each consisting of 100 multiple choice questions and two 30-minute essay questions. For more specifics see http://www.imanet.org/certification.asp

When I became a CMA in 1977, (Certificate 733) the exam was made up of five 3.5-hour exams spread out over three days. My initial reaction to the current change is that more people will take and pass the exam, but the value of the CMA will decline. I hope I am wrong about this.

I would like to know what other people think about the change, particularly those who are CMA's. Will the effect of the change on the value of the CMA be positive or negative?

Another thought: Someone could do a survey of current accounting faculty, practicing accountants, and CMA's, and get a publication out of this.

The Sex of a Hippopotamus

For an interesting book see:

Starkman, J. 2008. The Sex of a Hippopotamus: A Unique History of Taxes and Accounting. Twinset Inc. (JOA Review Link).