The director of federal regulatory affairs for the American Institute of Certified Public Accountants, Ian MacKay, talked with students and faculty Thursday at the Kogod School of Business about how General Motors' annual financial statements can be used to reveal details about the company's economic performance.
| An interview with Ian MacKayHOWIE PERLMAN / THE EAGLE |
"That's the story," he said. "A good one if you bought a car, not a good one if you were a shareholder."
The director also used the company's consolidated balance sheets, which show the values of GM's cash and the cash equivalents of all the items it owns, as well as the values of its debts and financing through stocks, to explain a significant reason why the company is having a hard time paying off its debts. He showed that GM's current assets, or cash plus items expected to be sold or exchanged for cash within less than one year - valued at $41 billion on Dec. 31, 2008 - were much lower than GM's current liabilities, or debts that are expected to be paid within one year - valued at $74 billion on Dec. 31. Since the current liabilities exceed the current assets in value by more than 40 percent, the balance sheets therefore suggest that GM will likely have billions of dollars worth of debts due by the end of 2009 that it will not be able to pay by the end of the year.
MacKay offered students advice on how they can play a part in helping America with its economic recovery.
"Students can help mostly by understanding the role of credit to themselves and the economy and [by using] it wisely without overextending themselves, especially in the accounting program, those that are more fiscally understanding the situation can educate others on the importance of the credit market and to save and spend wisely," he said.
The director also suggested that college students may want to take accounting courses to improve their ability to understand financial information.
"Accounting is a very fundamental knowledge to have," he said. "It's not just for the sake of a career but understanding cash management, understanding the business world, where you work and how it affects your paycheck."
The AICPA is the professional organization for all Certified Public Accountants (CPAs) in the nation, and administers the Uniform CPA Exam, which business students must pass if they wish to become certified public accountants and gain the ability to audit companies' financial statements.
You can reach this staff writer at hperlman@theeagleonline.com.
