CPA Credential Delivers High Value: Analysis Shows That Passing the CPA Exam Leads to Rewards in Small, Medium, and Large Companies
[ILLUSTRATION OMITTED] Accountants are skilled at making valuation decisions, not only for their organizations but also for their personal lives. However, there is one factor with career-spanning consequences that may not have been considered. Specifically, few may have actually computed the value of earning the CPA credential by considering the costs in time and money associated with acquiring and maintaining it versus the payoff in terms of salary enhancements over a typical career. CPAs in corporate accounting are largely convinced that the certification increases their earning potential, but by how much? And at what stage of one's career is there the most bang for the buck? Conversely, is it ever too late to benefit from becoming a CPA? Knowing the net present value (NPV) of obtaining a CPA license is important for those who are considering sitting for the CPA exam and for those mentoring new hires in their companies. Knowing the career-span value of being a CPA can help a 22-year-old new hire make this important decision. It can also help established professionals who have already invested some years as an accountant determine whether they can improve their future earnings by spending the time and effort necessary to achieve it now. A WORTHWHILE SACRIFICE? Studying for and passing the CPA exam requires candidates to make difficult choices in terms of time and money. It involves trading short-term goals (enjoying free time, not spending money on review courses, etc.) for a long-term goal. Many demands compete for time and attention, and balancing them is never easy. But if the unbiased numbers confirm the payoff of these sacrifices in clear, reasonably expected terms, would that help justify and support taking the more challenging path? This analysis provides those reasonably expected numbers by showing the NPV of putting in the work and sacrifices required to earn the CPA credential, based on the lifetime wage premium (the CPA return on investment, or CPA ROI) enjoyed by those who passed and maintained the certification versus those who did not. Using publicly available data provided by staffing services firm Robert Half for CPA and non-CPA salaries, the consumer price index (CPI), and other relevant indicators, this article presents a stage-by-stage analysis of the net earnings advantage that can be achieved by becoming a CPA. This article and the accompanying charts provide a year-by-year analysis based on CPAs' earnings in small, medium, and large companies. A LOOK AT THE NUMBERS As would be hoped, these numbers are significant. The table "NPV of CPA Earnings Premium in Total and Per Study Hour for Ages 22-59 (Small Companies)" provides the present value (PV) and NPV of the CPA premium for professionals ages 22 through 59 who work in small companies. (Tables that illustrate the PV and NPV of the CPA premium for professionals ages 22 through 59 who work for medium-size and large companies are available with the online version of this article at journalofaccountancy.com/cpa-value.) The chart, "Assumptions for Lifetime NPV of Passing the CPA Exam," which is also available with the online version of this article, provides the detailed assumptions that form the basis for the analysis. As the chart notes, this is a conservative NPV because it assumes each individual pays his or her own expenses. However, many CPA candidates may be fortunate enough to have an employer cover all or part of the expenses. In those cases, the NPV will be higher, increased by the amount of the expenses the employer pays. For example, as seen in column 2 of "NPV of CPA Earnings Premium in Total and Per Study Hour for Ages 22-59 (Small Companies)," a 22-year-old working in a small company will have earned $220,242 more than his or her non-CPA counterpart if they both worked until age 65. While these numbers are encouraging, the PV of earnings does not tell the whole story--the analysis can't stop there. …