“You gotta have style. It helps you get down the stairs. It helps you get up in the morning. It’s a way of life. Without it, you’re nobody.”
This bold statement by Diana Vreeland, recognized today as the Empress of Fashion1, reflects the importance fashion has in our everyday lives. Whether you consider yourself well-informed about the fashion world or not, you probably understand how crucial the fashion industry is to societies all over the world. Fashion is more than purses and runways, though. It is important to the world economy. It is a business. You probably know why accounting is important, but do you know why it is important to the fashion industry?
How the Fashion Industry Plays a Role in the Economy
The fashion industry is a multi-trillion-dollar global industry, with over $370 billion of that spent in the United States alone.2
According the US Congress Joint Economic Committee, “New York City is considered by many to be the fashion capital of the United States. Over 900 fashion companies have their headquarters in New York City. The fashion industry employs more than 183,000 people in New York City, approximately half of whom work in retail. The industry pays nearly $11 billion in wages and generates almost $2 billion in tax revenue each year.”
That is one city in one year. Whether you want to believe it or not, fashion is a pretty big deal.
A Quick Look at One of the World’s Most Famous Fashion Houses
In 1913, Mario Prada founded an exclusive and stylish store in Milan, selling accessories, luggage and other luxury goods.2 Once the store was known as a favorite among the Italian aristocracy, the brand became and continues to be a fashion powerhouse on a global scale.
However, 2016 has not proved to be a financially successful year for Prada. The fashion group profits declined sharply in the first half of the year due to new products and company reorganization. The net profit fell by almost 25% and revenues declined in all geographical locations.2
The Wall Street Journal credits the revenue drop in Europe and the Far East to a fall in tourism in the wake of frequent terrorist attacks.
Just as Prada was faced with declining sales and new company strategy, the fashion house was able to revel in a moment of triumph.
What Does This Have to do with Why Accounting is Important?
The headline reads: “How Prada’s New-Look Accounting Flatters Figures.” That’s right. Prada was suffering and their accountants turned out to be the superheroes who swooped in to save the day.
Prada’s stock surged 12% last week, the biggest one-day jump in nearly five years after the company reported operating profit came in 11% above analysts’ estimates. The earnings, however, come primarily from a subtle change in the company’s accounting policy, stated the article.3
So, you may be wondering what the “subtle change in its accounting policy” is. Well, “Prada previously depreciated store fixtures and furniture within 10 years, but now will start to depreciate those assets over the lease term of the shops.”3
Instead of depreciating the fixtures and furniture within 10 years, these assets will be depreciated within 12 years, which is the lease term of some stores, according Prada Chairman Carlo Mazzi. “Extending the useful lives of these assets boosted operating profit by [$36 million], or 15%.”3
This is why accounting is important. Without this change, Prada would most likely see the low profit that analysts expected.
Accounting can provide solutions to problems. And those at Prada can now breathe a sigh of relief thanks to their accounting team.
Accounting may not seem as glamorous as a Prada fashion show, but it essentially allows the fashion shows to continue. Without accounting, businesses, especially trillion-dollar industries, would struggle to function. It is so important it makes headlines in The Wall Street Journal.
Make Your Mark with a Career in Accounting
At Grantham, through a 100% online format, you can gain new possibilities for career advancement with skills and knowledge about theories, principles and practices of accounting. We recognize the integral role accounting plays in business and provide you with an opportunity to apply accounting strategies to solve problems in a global setting. If you are considering a career as an accountant, you probably already have an idea of why accounting is important, but we hope you now understand that the accounting department can be the linchpin of success for a company.
We know you have what it takes to be a part of the accounting team that helps one of the world’s most powerful fashion houses. Don’t let the lack of flexibility of a traditional education get in your way. Get started on your online accounting degree from Grantham today!
For more information about the graduation rates, the median debt of students who completed the program, and other important information, please visit http://www.grantham.edu/disclosures/BS-ACCT.