Death and dance by the numbers – learning financial accounting

I’m big on words, not so big on spreadsheets.

Naturally, I was concerned that our MBA financial accounting class with professor Per Olsson would leave me underwater, grasping helplessly for a familiar formula. That was true until I began to see it as the convergence of truth, lies, numbers, and the law.

Less like playing abacus, financial accounting more closely resembles water polo. Non-accountants seldom see all the machinations beneath the surface: all the work, analysis, risk, and cloak-and-dagger politics. There is scratching and grappling for the goals of public image, and of investor money. Meeting the butt of the spear in regulatory fines is also not great for anyone. It is a perpetual dance of combat among competitors.

In the news, many of us have seen this dance fall to pieces. It is a game of judging, labeling, and nomenclature. It is about decisions that are made to frame the truth, and, as an outsider, uncovering whether the arrangement represents what it claims to represent about an organization.

Through a litany of examples, Per shares that such decisions have tremendous gravity. Miscategorizing of “junk bonds” as “diversified bonds” is what led to the crash of the entire US housing market in 2008. How we use semantics to convey numerical data shapes and guides almost everything that drives a business, from customer strategy to financing.

There is math, certainly. But when you see that math through the lens of its purpose, it becomes powerful even for the spreadsheet-wary. An annual report might paint a beautiful tableau of a rich future, but the bones and structure of that vision are in the balance sheet, the income statement, and the statement of cash flows.

The game consists of players and referees; whether looking in as an outsider, or portraying the business as an insider, both fall under the umbrella of accounting. As professor, Per does a masterful job of equipping students for both.

Students leave the financial accounting course with a solid framework for sizing up the integrity of competitors, customers, and their own organizations. They leave prepared to find what is beneath the surface, take hold of it, and win.

Originally from the world of finance, Per brings a unique outlook on the forensically focused world of accounting. He stands on the Warren Buffett philosophy of rigorous integrity testing for investment and brings that to bear not only in financial accounting, but other courses at ESMT as well.

Beyond the financial accounting course, Per teaches a class for valuation and entrepreneurial finance, as well as a more technical course for valuation and financial analysis; the former is offered as part of the Full-time MBA program and the latter is offered to Master’s-in-Management students. Through these paths, students learn a forward-looking approach to accounting, using past numbers to look under a company’s hood and predict future performance.

Specifically for MBA students, the valuation and entrepreneurial finance class is designed to help students to navigate, as aspiring entrepreneurs, the web of securing funding that will help their idea to grow as it should. The curriculum incorporates many guest speakers, such as early investors in Spotify, who share their journeys and some of the nitty-gritty practices of the space. Students will also learn about “triggering events” that prompt tectonic shifts in the marketplace, and how they can be assessed.

Finally, students will emerge from each class with an ethical perspective in hand: Per’s aim in his courses is to introduce them to the pragmatic approach to doing good. That is the heart and soul of ESMT.