Zareh Tcheroyan, MBA

At Tanner LLC we work with a lot of technology companies and the subject software capitalization is always point of discussion. It is US GAAP, but we understand most investors just consider it a complication in the P&L and its hard to track and implement. The FASB board agreed this week to explore ways to simplify this GAAP, which would be welcomed. Below is a short summary of what they released. The Board decided to pursue targeted improvements to Subtopic 350-40, Intangibles—Goodwill and Other—Internal-Use Software. Specifically, the Board decided to: 1. Specify that the costs of software that has unresolved high-risk development issues would be accounted for as research and development (R&D) expenses in accordance with Subtopic 730-10, Research and Development—Overall 2. Clarify the starting capitalization threshold for nonlinear software development, including: a. Remove the requirement for an entity to evaluate the preliminary project stage and application development stage when determining the starting point for capitalization b. Require that an entity consider significant unresolved development uncertainties if it is unclear that it is probable that a project will be completed and the software will be used to perform the function intended. The Board decided not to further pursue a single model for recognition and measurement of software costs, which the Board had discussed previously, and decided not to make targeted improvements for recognition and measurement to Subtopic 985-20, Software—Costs of Software to Be Sold, Leased, or Marketed.

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"CFO becoming strategic partner" "Finance driving business transformation" "Finance from reporting to value creation" "CFOs leading innovation" "Finance shaping business strategy" We have been hearing these slogans now for almost 20-25 years, but has anything really changed? Except a few exceptions, the mainstream Finance function has been pretty much the same. While technology is fast taking over the manual work creating sizable space for Finance professionals to grab high-value tasks, in the absence of a solid framework, however, it is difficult to see any pattern of concrete change. Strategy and finance are two sides of the same coin when it comes to driving business success. Strategy is crucial because it helps develop deep insights into the market, competition, and future trends. It gives a business direction, purpose, and a vision for growth. But without finance, strategy remains just an idea. Finance provides the execution framework through performance management and measurement, ensuring that goals are met and resources are used wisely. Simply calling finance professionals Strategic Partners isn't enough. I have been teaching Strategy to CFOs and Finance Professionals for over 10 years. These people are not dumb. They pick up very quickly on strategic models and frameworks. Unfortunately, lack of a formal structure for their ongoing professional development does not provide them with the opportunities to grasp these ideas early on. For example, a senior finance professional who qualified as CA or CPA 15-20 years ago, relying on CPD/CPE for their ongoing professional development is a joke. Realizing this ongoing gap, in my little efforts, I have started working on creating a clear and practical framework for finance professionals about how they can identify, create and incorporate high-value strategic tasks into their work portfolio so that can drive financial performance using these powerful strategy models. If you want to taste the flavor of this strategic framework, you can read the sample of one chapter below. I would highly appreciate if you can provide your feedback or suggestions so I can incorporate before I finalize this book. https://lnkd.in/eYXzpJkR #CFO #CA #CPA #ACCA #StrategicPartner

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Even for seasoned CFOs, the world of finance comes with complex terms that often have significant strategic implications. Today, we’re breaking down a few financial concepts every finance leader should understand to drive better decision-making and enhance financial strategy: 𝟭. 𝗘𝗰𝗼𝗻𝗼𝗺𝗶𝗰 𝗩𝗮𝗹𝘂𝗲 𝗔𝗱𝗱𝗲𝗱 (𝗘𝗩𝗔): EVA is a performance metric that calculates the value a company generates from funds invested in it. It’s handy for CFOs who measure true economic profit rather than just accounting profit. It helps assess whether the company is creating wealth or just covering its cost of capital. 𝗪𝗵𝘆 𝗶𝘁 𝗺𝗮𝘁𝘁𝗲𝗿𝘀: EVA provides a clearer picture of shareholder value creation and is instrumental in long-term strategic planning. 𝟮. 𝗡𝗲𝘁 𝗢𝗽𝗲𝗿𝗮𝘁𝗶𝗻𝗴 𝗣𝗿𝗼𝗳𝗶𝘁 𝗔𝗳𝘁𝗲𝗿 𝗧𝗮𝘅 (𝗡𝗢𝗣𝗔𝗧): NOPAT represents a company’s potential cash earnings if it has no debt. It’s crucial for CFOs when comparing companies with different capital structures because it removes the effects of leverage. 𝗪𝗵𝘆 𝗶𝘁 𝗺𝗮𝘁𝘁𝗲𝗿𝘀: It offers a better comparison of profitability across companies in the same industry, especially when analyzing capital efficiency. 𝟯. 𝗙𝗿𝗲𝗲 𝗖𝗮𝘀𝗵 𝗙𝗹𝗼𝘄 𝘁𝗼 𝗙𝗶𝗿𝗺 (𝗙𝗖𝗙𝗙): FCFF measures the cash a business generates that is available to all funding providers (debt and equity holders). It’s a key metric in valuation models like Discounted Cash Flow (DCF). 𝗪𝗵𝘆 𝗶𝘁 𝗺𝗮𝘁𝘁𝗲𝗿𝘀: FCFF is crucial for capital budgeting and helps CFOs determine how much cash is available for reinvestment, debt repayment, or distribution to shareholders. 𝟰. 𝗖𝗼𝘃𝗲𝗻𝗮𝗻𝘁-𝗟𝗶𝘁𝗲 𝗟𝗼𝗮𝗻𝘀: These loans have fewer restrictions or covenants for borrowers and have gained popularity in leveraged finance. While they offer flexibility, they also carry risks. 𝗪𝗵𝘆 𝗶𝘁 𝗺𝗮𝘁𝘁𝗲𝗿𝘀: CFOs should be mindful of the trade-offs in covenant-lite structures, especially during uncertain economic conditions when flexibility could become vulnerable. 𝟱. 𝗧𝗼𝘁𝗮𝗹 𝗦𝗵𝗮𝗿𝗲𝗵𝗼𝗹𝗱𝗲𝗿 𝗥𝗲𝘁𝘂𝗿𝗻 (𝗧𝗦𝗥): TSR is a metric used to measure the performance of a company’s stock and dividends. It’s often used as a benchmark to compare the performance of different companies in the same industry. 𝗪𝗵𝘆 𝗶𝘁 𝗺𝗮𝘁𝘁𝗲𝗿𝘀: Optimizing TSR is a key goal for CFOs, as it directly impacts investor satisfaction and market valuation. By understanding and utilizing these advanced finance concepts, CFOs can gain deeper insights into their company’s financial health, optimize strategic decision-making, and communicate more effectively with investors and stakeholders. What other financial terms are critical for you? Drop a comment, and let’s discuss! #FinanceForCFOs #FinanceTerms #FinanceTerminology #AdvancedFinance #JargonBuster #CFOInsights #BusinessFinance #DNAGrowth #GrowWithDNA

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Hiring a CFO from outside the private equity sector can be a game-changer, but it requires careful consideration. Not every non-PE or deputy CFO candidate is ready for the demands of a PE-backed environment. So, what should investors and management teams look for? When considering candidates from outside PE, focus on those with corporate experience in high-stakes environments, such as rapid change or turnaround situations. These individuals often possess the agility and resilience needed to thrive in a PE-backed role. Additionally consider candidates with a strong “owner” mentality and experience in fast-paced, dynamic cultures. By identifying these qualities, investors can tap into a broader talent pool, finding CFOs who not only fit the role but also bring fresh perspectives and energy to the table. Read more about this in a previous article from Mark Tomley here>> https://okt.to/GOZ85W DRAX Executive are part of The LCap Group: Altus Partners, Drax Affinity, Rowan, Leadership Dynamics and PACE #leadership #CFO #privateequity

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Inflation, volatility, and concerns regarding the economy have held back IPO activity over the last years but there are signs of potential change. Thus far in 2024, “there have been 104 IPOs priced, compared to 154 in the entirety of 2023 and 181 in 2022.” Not exactly reaching the highs of 2020 where there were 480 public offerings and 2021’s staggering 1,035. However, there’s reason to be optimistic for a steady rebound. At the heart of an increase, Chris Morris details “lower interest rates." He says, "Now that the Federal Reserve has cut rates — and signaled that it plans to continue cutting in future meetings — the cost of capital is going down. And that could entice more companies to take the plunge.” Time will tell us if there is a significant rebound but Virtas Partners is seeing more preparation activity and expect a strong 2025. #ipos #investment #markets #deals #iporeadiness

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PRISM Insight 205: CFOs should produce quarterly valuations for private equity, R/E, and debt firms, because they are ultimately responsible for a fund's financial statements. Manager CFOs should have valuation competence, in the same way that the CPAs at the audit firms independently review and vet fair valuation during the year end GAAP/IFRS audits. #valuation #CFO #duediligence #investments #GAAP

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In the ever-evolving world of private equity, hiring the right CFO can make or break your portfolio company's success. The role of a CFO in a private equity setting isn't just about balancing the books; it's about driving strategy, managing risks, and delivering value creation. But how do you ensure you're bringing on board the best fit for your firm? 🤔 ✅ Align Vision & Strategy: Your ideal CFO should not only understand financial intricacies but also share your vision for growth and transformation. Their strategic insight can be pivotal in navigating market complexities. ✅ Foster a Performance Culture: The best CFOs are those who inspire teams, champion innovation, and cultivate a high-performance environment. Look for individuals who are not just number-crunchers but dynamic leaders. ✅ Assess Agility & Innovation: With market conditions changing rapidly, agility is key. Seek out candidates with proven track records of adapting to new challenges and leveraging technology to drive efficiencies. As decision-makers in private equity, focusing on these attributes will set you in good stead to recruit high-calibre finance leaders who align with your long-term goals. Remember, the right hire isn’t simply filling a position—it's an investment in your firm's future success. ✨ What qualities do you prioritise when hiring a CFO? 

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How can CFOs become strategic business partners? It starts by showing strategic leadership. Catch the full insights in the FinanceMaster Podcast here: https://lnkd.in/eJPTJ4DV CFOs must step in and fix the strategy-to-performance gap. Wharton has identified that strategies, on average, only deliver 63% of the expected returns. Being the steward of shareholder returns, this is not good enough for CFOs! How can CFOs step in? First, to facilitate and fix the strategy process. Tap into Roger Martin's "Playing to Win" strategy framework. Next, we should focus on the strategic levers for value creation. There are ten, as identified by McKinsey. 1️⃣ Size of revenue 2️⃣ Debt capacity 3️⃣ R&D investments 4️⃣ Industry trend 5️⃣ Geography trend 6️⃣ M&A program 7️⃣ Resource reallocation 8️⃣ Capital expenditure 9️⃣ Productivity improvement 🔟 Differentiation improvement The first three are historical, and the next two are external factors. That leaves five key levers a company can actively pull. To increase chances of strategic success, a company needs to pull two to three of them. It's important to note that they need to be pulled hard. That's because your competitors are pulling, too. To get started, you'll need to fire up the analysis engine. There are six steps to take: ✅ Calculate your current performance ✅ Calculate your competitors' performance ✅ Compare to all other industries ✅ Analyze your largest improvement potential ✅ Discuss findings in the management team ✅ Take action to improve performance Companies are rarely at the starting point of creating a new strategy. So, you can start with the levers and take stock of your current strategic performance. CEOs are looking for these insights, which will help them brand the CFO as a strategic business partner. How would you say a CFO can become a strategic business partner? ---------- 📺 FinanceMaster on YouTube: https://bit.ly/4bSBut6 📢 Join our WhatsApp channel: https://bit.ly/3WWGOrc 👩‍🏫 Our LinkedIn Learning course: https://bit.ly/4a5fB9l 📻 FinanceMaster Podcast: https://bit.ly/3NLSt73 📄 FinanceMaster resources: https://lnkd.in/eC_zuCU4

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What do CFOs worry about? A CFO’s fundamental concern is running out of cash—not having enough liquidity to meet short-term obligations such as payroll, debt, and suppliers, and thus having to declare bankruptcy. Less drastically, CFOs worry about managing the use of company cash wisely, making the right investments to support growth, and getting paid promptly by customers. CFOs also worry about the impact of macroeconomic trends on their business, including financial factors such as monetary and fiscal policy and consumer confidence, and non-financial factors such as geopolitical unrest and supply chain disruptions. * from "10 Big CFO Trends for 2024" Megan O’Brien, Content Strategist, May 31- 2024

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CEO vs. CFO Most CEOs can use more financial acumen. Many CFOs can benefit from a more strategic mindset. Companies need both strategic foresight and financial acumen. -------- 1️⃣ The CEO sets the vision ➡️Role: Defines the company's strategic direction and long-term goals. ➡️Focus: Cultivates company culture and drives the overall vision. ➡️Decisions: Makes broad strategic business choices. ➡️Stakeholder Relations: Serves as the face of the company, engaging with external stakeholders. 2️⃣ The CFO finances the vision ➡️Role: Manages the company's financial operations and health. ➡️Focus: Ensures financial stability and efficiency. ➡️Decisions: Oversees financial planning, risk management, and reporting. ➡️Internal Collaboration: Works closely with the CEO and other executives to align financial strategy with business objectives. 3️⃣ Essential things you need to remember: 🎯The CEO leads, the CFO supports with financial insight. 🎯The CEO thinks growth, the CFO ensures fiscal responsibility. 🎯The CEO sets the vision, the CFO provides the financial roadmap. 🎯CFOs can shape strategy by understanding the broader business strategy. 🎯CEOs can enhance fiscal responsibility by broadening their financial acumen. What do you think? ----------------------  ❌ Frustrated by Short-Sighted Financial Plans? Financiario can help.   ➡️➡️➡️➡️ Transform your strategic financial planning with long term forecasts ➡️➡️➡️ Anticipate the future with automated reports & dashboards. ➡️➡️ Align your operating plans with your financial strategy. ➡️ Solve your most critical strategic planning problems.

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What Makes a True CFO? Spoiler: It's Not Just About the Credentials CFO extends far beyond mere financial reporting and analysis. A strategic CFO is an invaluable asset, serving as a trusted advisor to the CEO, and providing insightful guidance that drives growth and propels the company towards success. Credentials: A Measure, Not a Prerequisite While credentials such as CPA, CMA, or CFP are respected and valuable, they should not be the sole determinants of a CFO's capabilities. The true measure of a strategic CFO lies in their ability to analyze financial data, identify opportunities, mitigate risks, and provide actionable insights that drive growth and profitability. A Strategic Partner A strategic CFO is a visionary, a problem-solver, and a strategic partner who collaborates closely with the CEO to navigate the complexities of the business landscape. The Art of Strategic Advice A strategic CFO excels in the art of translating financial data into strategic advice. They possess a deep understanding of the company's operations, industry trends, and market dynamics, enabling them to offer valuable recommendations that align with the CEO's vision and goals. Their advice is not merely a recitation of numbers but a comprehensive analysis that considers the broader business context. The Parallel with Tax Professionals Just as with CFOs, the true value of tax professionals lies not solely in their credentials but in their ability to deliver results. While certifications and qualifications are important, what truly matters is their expertise, strategic thinking, and ability to navigate the complexities of tax laws and regulations to maximize financial benefits for their clients. 👉 Do you agree? What do you think makes a true CFO or tax professional? Let's discuss in the comments!

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