Ernst & Young Introductory Accounting

Originally published June 2015

In between all the amazing trips I’ve been taking, I’ve been taking classes too: managerial accounting and marketing.  I’m very glad, as I plan to concentrate in marketing and accounting, which makes my summer courses very interesting. My accounting teacher is also absolutely amazing, and always goes above and beyond to teach us things outside of the classroom too. Just last week he was kind enough to set up a meeting with some people at Ernst and Young’s Lyon office to meet with some of us interested in accounting, and so we could see how accounting ties into other fields.

ernst-young-lyon-accounting-office

We arrived and were met with four EY workers: Terrence, who works as a tax attorney, Oliver, who works with audits and transaction support, Matthew, who does evaluations, especially for mid-sized companies, and Phillipe, who runs marketing and business development. It was interesting learning about each of their jobs, and about a Big Four company in general.

Terrence works with transfer pricing, and how it relates to tax and legal situations.  He described his job by saying that tax and legal treatment of a company flows within a group of companies, and it’s his job to keep everything in line. In essence, someone in his position keeps track of the sale of goods, services, and firm transactions transfers. He also talked about the “arms length” principle, which is essentially the important of a fair market value. The key issue he described was that if you don’t value a transaction at arms length, then you might shift profits from one country to another. Terrence then talked about how his job fits in at EY. His team is the biggest transfer pricing team in France, which is important because when EY ran a survey, they found that transfer pricing is an area that needs the most improvement across the board, as clients have difficulties with the intricacies if it.

Oliver works within the transaction support team, which assists in the transaction process. The transaction process is essentially anything to do with the sale of something. There are two main categories, buy vs. sell, and both have very different objectives. The first part of the job is to look at the financial information and discuss how the business works, key drivers, and key events that pertain to the company. It is important to not just focus on the numbers though, but to look at the historical importance of the company. Oliver also mentioned the importance of assessing things like foreign exchange rate impact, the impact of setting prices, how a change in production changes efficiency, and to analyze variations. It’s also key to identify non-recurring items, such as lawyer fees and reconstruction costs. Profit margins are also of interest to EY. After all this, he will analyze the balance sheets, focusing on capital expenditures. Working capital, depreciation, and risk are also analyzed. Part of the job is also drafting pro forma financial statements. Something else interesting is that the job is pretty cyclical in nature, so the work depends on the economy.

Matthew worked with transfers of sales of assets for accounting and tax purposes. He deals with determining the fair market value frequently, and discounting cash flows to determine fair market value. He went into details of the topic, which was interesting as it was related to what we had learned in class that very morning. He spoke more about how he also uses the market approach by looking at competitors, as you know the fair market value of listed companies. It’s important to implement at least two methods to make sure you are correct in your estimates, and if there is big difference between the different methods you have to be able to explain why. Matthew also gave us a tip for the future, telling us that Excel skills were highly valuable, and that he and everyone in his office uses Excel all the time, so it’s important to master it early. He then went more into his job, detailing how he has to value assets such as real estate, intangibles (value of a trademark for example), equity interest (the main part), tangibles, business modeling, and complex securities.

My personal favorite, however, was Phillipe, as he dealt with marketing and business development. He started off talking about Ernst and Young in general, and how they aren’t focused specially on outsourcing or consulting, but somewhere in between. In 2013 EY decided on Vision 2020, a new goal strategy, where they decided that they wanted to grow from 25 billion to 50 billion, become a market leader, do more with clients, and improve Exceptional Client Services, which includes being collected, responsive, insightful, and proactive. Ernst and Young focuses on business to business marketing, and wants to expand their Brand Marketing Communications Department, which will develop marketing programs to clients, to prospective clients, to EY people and to students. Ernst and Young’s market approach is to many people, not one-to-one, and they find it very important to maintain a good brand image.

Ernst and Young also has many different client segments, leading to the creation of the Global 360 Client (G360). This consists of the top 360 clients they want to maximize revenue for. All four of their service lines are more or less present for these clients, which is important because they have an average of 1.4 service lines per company, and with more service lines there is more revenue. These are generally Fortune 500 companies, as they have the money to pay for EY’s extensive services. There is also the Strategy Gross Market (SGM) however, a very important group for EY. Studies have shown that 50% of the market leaders are to change within the next five years, meaning that the leaders of today are not necessarily going to be the leaders of tomorrow. It is Ernst and Young’s job to identify them, so they can capture their business early. Because of this, SGM consists of segments for startups, family businesses with great innovations, great plans, and great entrepreneurs.

Marketing initiatives for Ernst and Young are pretty interesting as well, especially to me who is interested in accounting and marketing. They hold events aimed for around groups of clients, such as ‘business breakfasts,’ which the company holds approximately thirty times a year. They also invite clients to see them speak at events, and talk at conferences others host to speak about hot industry topics, in order to show their knowledge in developing fields related to accounting. They also run advertisements, although they are usually in professional magazines and on business ratio stations, and are increasing their social media usage.

Ernst and Young’s marketing plan is becoming increasingly global, and are doing new initiatives throughout the countries they operate in, such as “Entrepreneur of the Year,” which has been run for 24 years, now in 60 countries. Essentially they have entrepreneurs all over the world enter to be named the “Entrepreneur of the Year” for their country, and there is one world winner. There are also multiple categories, such as ‘family business,’ ’emerging,’ and ‘technology,’ for example, which means that more people can be recognized for their achievements.

I found the visit very interesting, especially since I have a developing interest in accounting. I don’t know what I would be interested in when it concerns accounting, but it’s interesting to start scoping out potential fields. Marketing is still my favorite of the two, which is why I found Phillipe’s job more intriguing, as it was a mix of the two fields. I have yet to figure out what my ideal career path will be, so I am glad I have had another opportunity to get one step closer to figuring things out!