Summary by James R. Martin, Ph.D., CMA
Professor Emeritus, University of South Florida
How to Manage Yourself Main | Professional Certification Main
The purpose of this paper is to show a stage-by-stage analysis of the net earnings advantage of becoming a CPA. There are three tables in the paper:
1. Net present value of CPA earnings premium in total and per study hour for ages 22-59 (Small Companies)
2. Net present value of CPA earnings premium in total and per study hour for ages 22-59 (Medium Size Companies)
3. Net present value of CPA earnings premium in total and per study hour for ages 22-59 (Large Companies).1
Each table has seven columns:
1. Age - ranging from 22 to 59
2. PV of CPA cumulative lifetime earnings premium for CPA
3. PV costs of attaining the CPA based on 400 hours of study time
4. PV costs of maintaining the CPA
5. PV of the total cost = Column 2 + Column 3
6. Net Present value of CPA = Column 2 - Column 5.
7. NPV of CPA premium per hour of study = Column 6 ÷ 400 hours
The following three tables are based on Column 2 in each of the three tables.
The values in the tables are based on Robert Half's 1992-2014 surveys for CPA and non-CPA salaries, the consumer price index and other relevant data. Salaries are assumed to increase at 3.1% per year for non-CPAs and 5% for CPAs. The values are conservative based on the assumption that each individual pays for his or her own expenses. In addition it is assumed that each individual works until age 65 and that each individual works for the same size company throughout his or her career. The present values increase and peak at age 38 because of the assumptions that salaries rise steadily through age 39 and that each individual will be promoted from manager to assistant controller at age 39. It is also assumed that each individual will achieve the controllership position in their career, but will not advance higher.2
The three graphs below include the net present value of the cumulative lifetime earnings premium for the CPA (column 6) along with the present value of those earnings provided in the illustrations above.
For those who work in small companies, the NPV premium per hour of study (Column 7) ranges from $324 for a 22 year old to a negative $43 for a 59 year old. For potential CPAs in medium size companies the per hour study premium ranges from $845.83 to $78.23. For those working in large companies the premium ranges from $2,154.72 to $456.75 per hour of study. Assuming these estimates are in the ball park, they show quite a return on the investment of 400 hours of study.
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1 The graphic illustrations for the medium and large size companies are based on data from the online version of the paper. See Journal of Accountancy
2 Assumptions are provided in the online version of the article. See link in previous note.
Related summaries:
Brausch, J. M. and D. Whitney. 2009. CMA: The quest for increasing value. Strategic Finance (December): 9-10, 12. (Summary).
Krippel, G. L. and S. Mitchell. 2011. What's your CMA worth? We show you how to estimate the lifetime value of the certification. Strategic Finance (November): 41-47. (Note).
Krippel, G. L. and S. Mitchell. 2017. The CMA advantage: An update. How much more could you earn throughout your career if you became a CMA right now? Strategic Finance (September): 38-45. (Summary).
Martin, J. R. Not dated. Accounting Certifications. Management And Accounting Web. AccountingCertifications.htm
Martin, J. R. Not dated. IMA salary calculators 2010-2017. Management And Accounting Web. SalarySurveys.htm
Pappano, L. 2011. The master's as the new bachelor's: Call it credentials inflation. A four-year degree may not cut it anymore. The New York Times Education Life (July 24): 16-18. (Summary).
Schiffel, L., K. A. Smith and D. L. Schroeder. 2011. IMA 2010 salary survey: How's that recovery workin' for you? Strategic Finance (June): 26-46. (Summary).
Simon, C. C. 2011. R.O.I.: Is graduate school worth the investment? The New York Times Education Life (July 24): 18-19. (Summary).
VanZante, N. R. 2010. IMA's professional certification program has changed. Management Accounting Quarterly (Summer): 48-51. (Summary).
