Five ways accountants make me laugh (without meaning to)


The first is CPA. Every accountant thinks they know what this stands for.  Certified Public Accountant in the USA they will say. But that is not always true.

To confuse us, five countries have conspired together to use CPA to confuse us:

CPA Hongkong                 Certified Public Accountant

CPA India             Certified Public Accountant

CPA Ireland         Certified Public Accountant

CPA Australia    Certified Practicing Accountants

CPA Canada        Chartered Professional Accountant

These initials were not chosen by chance. CPA gives the impression they are the same, whereas accountants know they are not. As you can see, nearly everyone likes ‘certified’ except for the Canadians who chose to follow the British tradition of chartered. I don’t know who copied whom with the choice of public and the letter P. Why did they not choose Private?  The Australians and Canadian accountants decided to be more imaginative with their ‘practicing’ and ‘professional’ while staying in the CPA mould.

However, they have all dropped the full name and resort to the initials CPA, which is now a well known and respectable equivalent to the British chartered, even if most people do not know what the C and P represent. They are designed to seem the same but they are not.

Going Concern

The second is going concern. I have always thought it a silly expression. Instead of going concern what if they called it a ‘leaving worry’?  It would be just as silly.

Going cannot be a farewell, as in going away. Where is it going? Or perhaps how is it going? As in ‘the going is good’? Going is foolish. Why not viable? That is more reasonable.

Concerns don’t go anywhere either. And is the ‘concern’ part an ongoing worry? But no, one has to guess that their concern is nothing to worry about. Nor is it related to the phrase ‘to whom it may concern.’ Concern here means organisation or enterprise. So for instance ‘viable organisation’ would be easier to understand, than going concern.

Going concern is obvious for an accountant but not for the ordinary person.

There is even some doubt whether the term was invented by an accountant. It seems that the first reference appeared as an advertisement a little over 200 years ago, when a bottle factory was put up for sale. [1] Did the owner put in the advert or did he ask his accountant to sell his factory. A mystery!  If they didn’t invent it, accountants have taken it over as their term.

 [1] Source Oxford English Dictionary, “1818 Caledonian Mercury 27 Apr. (advt.)  The Bottle Manufactory is a going concern which would be a great advantage to a purchaser, in the view of continuing the business”.

Overhead Variance

The third is overhead variance in standard costing. To keep it complicated, accountants invent, not one, but two Overhead Variances: variable and fixed. 

One of the variances becomes the bizarre ‘variable variance’: the Variable Overhead Variance or VOV.  VOV as you might know is an Italian egg liqueur invented by Gian Battista Pezziol, in 1845 well before the accounting profession took it up as an accounting term. How weird is that?

Accountants then explain the four variances they create for the Fixed Overhead Variance: Fixed Overhead Expenditure Variance, Fixed Overhead Efficiency Variance, Fixed Overhead Volume Variance, and Fixed Overhead Capacity Variance.  This is one of the accountants usual jargon techniques of stringing four words together to create an accounting term, I suppose in their eyes, to make it simple to construct but impossible to understand.

I often wonder whether this quote by David Ogilvy, the late British advertising tycoon and founder of Ogilvy & Mather, applies to some members of the accounting profession:

Our business is infested with idiots who try to impress by using pretentious jargon”.

Confusion around GAAP

The fourth is GAAP. Every American accountant knows Generally Accepted Accounting Principles as a part of the rules set by the Financial Accounting Standards Board (FASB).

‘Generally accepted’ is an odd expression to use. What, I wonder, are the parts that are not accepted and who are the people who do not accept them? Some people, some of the time do not accept some of the principles.

I suspect that generally here means definitely or totally. In which case, UAAP, as in Universally Accepted Accounting Principles or TAAP, as in Totally Accepted Accounting Principles would be more accurate. Even just AAP, Accepted Accounting Principles would be better. The mystery however remains unsolved, because American accountants never discuss this anomaly. The word generally in this context has become so familiar it now means fully accepted, not generally accepted.

In the UK GAAP is something completely different. They are not principles at all but a practice: Generally Accepted Accounting Practice. And to use the explanation of the Institute of Chartered Accountants in England and Wales, UK GAAP “is the body of accounting standards published by the UK’s Financial Reporting Council (FRC).” These standards are in turn based on EU-adopted IFRS.

GAAP in the UK is so familiar that in many documents written on this subject, accountants never explain what the letters mean: Generally Accepted Accounting Practice. And in the UK they follow their US colleagues and omit to explain why they use the term ‘generally accepted’ when they mean ‘fully accepted’.

So we have two GAAPs in two countries with different meanings. Non-accountants might find this is confusing but accountants in both countries don’t care. They know what their particular GAAP means and for them, only that matters. They don’t talk to each other anyway.


The Fifth is EBITDA. Let’s take the financial statements of some well known quoted companies and see what they say about EBITDA.

Amazon, GSK (GlaxoSmithKline) and Johnson & Johnson do not mention EBITDA in their annual reports.

Roche do not recognise EBITDA as a measure in their financial statements:  

“The Group does not use … EBITDA in either its internal management reporting or its external communications.”

But they are cooperative with their readers and continue with:

 “For the convenience of those readers who do use EBITDA, this is provided in the table below.”

And they give a calculation by business segment of EBITDA. How about that?

The auditors mention EBITDA in the Walgreen Boots annual report, as part of their discussion of Critical Auditing Matters. They bring in what they call ‘EBITDA margins’, whatever that might be, requiring ‘a high degree of audit judgement’. 

AstraZenica like EBITDA the most, with 15 mentions in their 2021 annual report and have a calculation they call a ‘reconciliation’ to help their readers.

Associated British Foods like EBITDA too. They sprinkle it around their annual report five times. They even calculate it specifically in Note F to the financial statements and include an impairment charge in their EBITDA calculation.

So DA in EBITDA is not DA at all. It should be replaced with DAI. It should be EBITDAI: Earnings before Interest and Taxes and Depreciation and Amortisation and IMPAIRMENT.  EBITDA is a myth without the ‘I’ for impairment.

But accountants always have an answer to irreverent comments. They argue, of course, that companies do not always have impairment charges, but always have both depreciation and amortisation. So they think their DA is correct most of the time. And that is good enough for them.