The CFA 2006 Annual Report is Pretty Poopy

by Johnny Debacle

The CFA Institute releases an annual report each year documenting their results and accomplishments.

You would think that an organization whose sole raison d’etre is to certify industry standards both in analysis and presentation would be especially attuned to how they present their annual report and the relevance of the content inside. But then, thinking is not the basis for attaining your CFA (rote memorization is).

Every single one of the CFA Institute’s charts starts on the left with the most recent financial year and ends with the earliest financial year, the opposite of what any reader would expect.

We read left to right. So do most human beings. Almost every chart in the history of mankind goes left to right, starting with the earliest date on the left ending with the latest date on the right. Then why is it that most companies persist in the illogical layout of putting their most recent financial year on the far left? And why does the CFA use that standard when they exist only to improve financial standards? What exactly are they paying their president $900,000 to do?

Why does the annual report show pictures of charterholders describing what their CFA means to them while doing something entirely unrelated to finance, like playing a guitar or gripping their Nikon camera? Is this a Lifetime channel brochure or some shit? I thought the whole point of becoming a CFA charterholder was to make more bank? Why not show CFA charterholders making it rain at Scores? Isn’t that why we fight?

If a professional financial analyst was reading through the annual report of a company, and were treated to a picture of the CEO playing the drums and the CFO wearing a captain’s hat on on his schooner, what conclusion should they draw from that about the quality of the company’s management? Is that a firm in which to invest? I’m sure there is some LoS which covered that.

Recommendation: Don’t worry candidates and charterholders, you are spending your time wisely, trust us. Once you get your CFA, you will be strumming your guitar and taking pictures all day long.

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Comments

  1. PairOfSox
    April 10th, 2007 | 3:42 pm

    The CFA institute is one of the biggest money making schemes ever. That’s why the test keeps getting harder, so more people fail and have to take it again if they want their precious designation.

  2. Texas Hedge
    April 10th, 2007 | 4:13 pm

    Uggghhh…someone want to sit and take level 2 for me in June?

  3. April 10th, 2007 | 4:47 pm

    They have also added 50% more charterholders in the last 5 years. They should probably make the test even harder.

  4. J
    April 10th, 2007 | 5:32 pm

    if think MSFT does their shit that way too

  5. NYT Junkie
    April 10th, 2007 | 5:40 pm

    Those that can, analyze. Those that can’t, work for the CFA Institute. Useless morons…

  6. contango
    April 10th, 2007 | 11:27 pm

    LOL at some of the CFA posts back in the archives here and wanted to recommend a book –

    Traders, Guns, and Money, by Satyajit Das

    Published in 2006 and it is the Fear and Loathing of structured products.

    Good luck in June.

  7. backwardation
    April 11th, 2007 | 10:00 am

    im so far behind on my studying.. lvl 2 could be a close one

  8. Andy
    April 11th, 2007 | 10:10 am

    has the author of this article ever heard of something called a 10-K or a 10-Q, or an annual report for that matter? the columns are ALWAYS in most recent on the left.

    those that can, analyze.
    those that can’t, write financial blogs.

    I do agree 100% on the waste of my dues every year, what a scam.

  9. April 11th, 2007 | 10:28 am

    10-Qs and 10-Ks — Is that where Capital IQ gets its information and lays it out earliest on the left most recent on the right? I wonder why it does that???

    Everyone doing it doesn’t make it any less illogical.

  10. Charlie McDanger
    April 11th, 2007 | 12:45 pm

    Here’s another doozy: the guys over longorshortcapital have taken to putting their most recent posts–get this–at the TOP of the page.

    Now I don’t know about you, but where I come from, we read from top to bottom. So do most human beings. Almost every writing in the history of mankind goes top to bottom, starting with the earliest entry on the top and ending with the latest entry on the bottom.

    But I plagiarize. Another thought: perhaps the CFA monkeys recognize that right-to-left accounting will come in handy when the Chinese take over…

  11. April 11th, 2007 | 1:39 pm

    Apples to oranges — our current content doesn’t benefit from the context of yesterday’s content (although it does benefit from the context of the whole site, which is what we address with the sidebar on the * LEFT SIDE *). Financials are useless without context and happen sequentially.

  12. McDanger
    April 11th, 2007 | 2:05 pm

    Ashes to ashes! I would submit that in both cases, the typical reader wants to see the important stuff (read: recent) first.

    It’s a functionality question: If you’re writing a traditional novel, you put the pieces in place sequentially. If you’re writing the news, you start with the result, and then add the backstory.

    “A foolish consistency is the hobgoblin of small minds.” -famous gay Irish dude

  13. April 11th, 2007 | 2:15 pm

    Dust to Musk!

    You definitely want to see the most recent results first, but you always want to be able to make sense of them quickly. If you spread the numbers yourself, have you ever done it most recent year first when you have had more than 2 years? If you were presenting a company as an investment to a third party, how would you present the numbers?

  14. Poseidon
    April 11th, 2007 | 3:09 pm

    Methinks I am in agreement with Johnny here. Do you ever read a chart with the most recent data first? Do you see Ibbotson’s S&P 500 line graph starting with 2006 and working backward? Do you do a DCF starting with the current year? No, you don’t because it is totally illogical. To top it off, CFA level 1 corpfin shows ex-post to ex-ante. Old to new is how it should be, thus endeth the sermon.

  15. Charlie McDanger
    April 11th, 2007 | 4:55 pm

    After you said, “You definitely want to see the most recent results first,” I started going “LA LA LA LA LA LA!” really loudly. I’m just glad we’re in agreement.

  16. April 11th, 2007 | 10:03 pm

    A technique pulled straight from my quiver. You are a master of debating. A debating master.

  17. PairOfSox
    April 12th, 2007 | 2:25 pm

    Don’t worry about the Chinese, I saw the CFA Institute building in Beijing last year.

    It’s a world-wide scam.

    That’s probably where the 50% more charterholders are coming from. You know, since they’re so good at math and there’s so many of them (I can say that cuz I am one).

  18. Cincinnatus_C
    April 18th, 2007 | 5:56 pm

    to the left, to the left

    (private joke)

  19. Richard
    January 16th, 2008 | 10:36 am

    Tropico (good game) uses that right-to-left accounting in the year end reports. Does my head in.

  20. Peter
    February 10th, 2008 | 2:18 am

    Well the pictures ar defently made by the marketing department. If you have your CFA you don’t need to understand and most certainly you don’t want to understand that crap. Next semester I have marketing in my curriculum – wish me luck that I turn still ok afterward – I think a little “Marketing Mix” will make it a little easier to follow the illogical logic of marketing.

  21. V
    May 13th, 2008 | 2:34 pm

    Don’t hate on marketing it drives up sales to telling the drones, and the people in the bible belt (or anyone that does whatever they are told to do, or buy), what they should buy because that will make them cool. er, smart, whatever.

    <CFAer and Strategic Marketing Guru. I own you.

    Oh, and I also have a prep course I make $ off. Figure, like with MLM’s, if you have a steady stream of people who are ready, willing, and able (see I’m like the army there, see? see?) might as well sell them something expensive.