Strategic Management Accounting

Strategic Management
Accounting
Strategic Management
Accounting
Delivering Value in a Changing
Business Environment Through
Integrated Reporting
Sean Stein Smith
Strategic Management Accounting: Delivering Value in a Changing Business

Environment Through Integrated Reporting
Copyright Business Expert Press, LLC, 2017.
All rights reserved. No part of this publication may be reproduced,
stored in a retrieval system, or transmitted in any form or by any
meanselectronic, mechanical, photocopy, recording, or any other
except for brief quotations, not to exceed 400 words, without the prior
permission of the publisher.
First published in 2017 by
Business Expert Press, LLC
222 East 46th Street, New York, NY 10017
www.businessexpertpress.com
ISBN-13: 978-1-63157-684-3 (paperback)
ISBN-13: 978-1-63157-685-0 (e-book)
Business Expert Press Managerial Accounting Collection
Collection ISSN: 2152-7113 (print)
Collection ISSN: 2152-7121 (electronic)
Cover and interior design by Exeter Premedia Services Private Ltd.,
Chennai, India
First edition: 2017
10 9 8 7 6 5 4 3 2 1
Printed in the United States of America.
Abstract
This book critically analyzes the concept of strategic management accounting, the implications this emerging paradigm will have on the accounting
profession, and the ramifications for businesses at large. While there
has been significant research and publication regarding the concept of
strategic management accounting (SMA), this book approaches the area
in a unique and innovative way. This manuscript approaches the topic
in a way that is unique by linking the concept of SMA to the integrated
reporting framework. In essence, strategic management accounting is a
theory with broad-based support, but the IR framework and reporting
structure provide a vehicle through which progress, costs, and benefits
of a more strategic accounting function can be evaluated. Focusing on
principles, primarily for internal management utilization, the following provides an outline and summary of concepts and techniques that
can be used to elevate the role of the management accounting function.
Whether you are a management expert, an accounting professional, or
simply someone looking to keep up-to-date with emerging business
trends, this text provides the content, and action-oriented steps to meet
those expectations.
Keywords
accounting, finance, integrated reporting, multiple capital model, strategy,
strategic management accounting
Contents
Prefaceix
Acknowledgmentxi
Key Concepts and Themesxiii
Chapter 1 What Is Strategic Management Accounting?1
Chapter 2 Corporate Governance & Sustainability31
Chapter 3 Accounting and Analytics47
Chapter 4 Strategic Management Accounting & the Path
Forward59
Chapter 5 Finance 2.073
Chapter 6 From Concept to Reality95
Chapter 7 Market Examples and Implications127
Chapter 8 Integrated Reporting & the Future of Accounting153
Chapter 9 Strategic Management Accounting: A Path Forward175
References185
Index189
Preface
Accounting is undergoing a transformation and paradigm shift linked
directly to how the profession is perceived both among fellow professionals and by the marketplace at large. Despite the fact that this shift
and the changing nature of the profession have been identified in both
practitioner and academic circles, much work remains. Accountants
and financial professionals must be able to keep pace with the growing
requirements placed on the profession, as well as the new tools and technology available to help these professionals meet their goals. In essence,
a new way of looking at accounting is necessary in order to navigate the
business environment, and a more strategic view is required.
Strategic management accounting is not a new concept. It has existed
within the scholarly literature for several decades. What is new, however,
is the importance of this concept to the current and future viability of
the accounting profession as an industry. While the rising demand for
quantitative information provides numerous opportunities, particularly
as they pertain to sustainability, governance, and other areas of emerging
importance such as human capital and analytics, all these areas also come
with challenges. Data scientists, big data experts, and other p
rofessionals
are seeking to expand their respective spheres of influence within the
business decision-making process.
Accountants must be able to leverage and make effective use of these
new technologies in order to fully embrace the changes coming to the
profession. In essence, accounting must embrace a more strategic and
long-term point of view when it comes to how work product is produced
and distributed to end users. Simply put, accounting has to become more
strategic in concept and in reality. This path forward, of course, is not
the only option available for accounting professionals, but in the humble
opinion of this author, it appears to be the one most closely linked to
reality and the practical implications of the marketplace.
Acknowledgment
This book is dedicated to my family, for their patience and support as this
book took shape.
Key Concepts and Themes

Integrated Financial ReportingIntegrated reporting (IR) represents
a true paradigm shift in the field of financial reporting. Incorporating
aspects of sustainability, corporate governance, and risk management into
the financial reporting process differentiates this model from traditional
financial reporting. Additionally, the continuous and forward-looking
nature of this reporting model makes it stand apart from historical
financial reporting, which is historical and focused on information and
events that have already occurred.
Corporate GovernanceIn essence, corporate governance is how
organizations interact both internally and with external partners and
stakeholders. Specifically, the Board of Directors, which is in charge of
governance and strategic thinking, must be able to conceptualize and
understand the various linkages between organizational performance
and the fiduciary responsibilities owed to external users of organizational
information.
SustainabilitySustainability, in and of itself, is a straightforward
concept linked directly to the idea that organizations should operate in
a manner that is environmentally considerate. Following the financial
crisis of 2008, however, sustainability and the interaction of sustainability
and business operations have continued to evolve. In short, sustainability
is now viewed by many organizations and stakeholders as essential for
organizational success, as opposed to a reporting requirement.
Stakeholder Theory and ReportingStakeholder theory represents
the reality that organizations must report to, and are held accountable
by, a multitude of organizations and users of organizational data. No
business can exist or operate in vacuum, and management must be able
to articulate and explain both the results of current operations, and the
longer term objectives of the organization to financial and nonfinancial
stakeholders alike.
xiv
Key Concepts and Themes
AnalyticsOften used interchangeably with big data, analytics is less

about the quantitative analysis and resulting information itself, and more
about the application of said analysis to business decision making and
problem solving. In the context of strategic management accounting
(SMA), analytics and the application of such tools and procedures play
a critical role in the development of the SMA function. Importantly,
embracing this trend and shift in the marketplace is imperative for the
development of Finance 2.0, expanded upon with this writing.
CHAPTER 1
What Is Strategic
Management Accounting?
IntroductionThe Importance of Strategic
Management Accounting
Globalization, digitization, and increased competition continue to
increase the competitiveness of the business landscape as well as the pace
of changes. Organizations in virtually every industry, and specifically the
management teams at said organizations, are under scrutiny from an
increasingly broad set of interested parties. Shareholders, activist investors, environmental groups, and other interested external stakeholders
require information and quantitative data in order to evaluate organizational performance. In order to satisfy these requirements, it is important
that management professionals assess and review the appropriate information. Several trends, partially in response to these extrinsic forces, and also
partially in response to transitions occurring organically, are converging
to address these evolving requirements and demands. Integrated financial
reporting, representing an iteration and evolution of several types of nontraditional reporting, blends elements of financial and nonfinancial information including aspects of corporate governance, sustainability, and
risk management at an organizational level. Such a formalized template
provides a platform and vehicle for management accountants to play a
more proactive role in the decision-making process. Designed to be more
forward-looking and comprehensive in nature than traditional reporting,
integrated financial reporting provides a more comprehensive and holistic
view of financial performance and the health of the organization.
Additionally, and more pertinent to the finance and accounting fields,
is the reinvigoration of strategic management accounting (SMA). SMA,
and the recent increase of research and conversation about this concept,
STRATEGIC MANAGEMENT ACCOUNTING
appears to be linked to the rise of nontraditional reporting, including

integrated financial reporting. As organizations require large amounts
of data to disseminate to a broad range of stakeholders, several nontraditional factors must be factored into the business of decision-making
process. In order for this to occur successfully and consistently over time,
however, there are several steps that must happen at an organizational
level. This realization and the reality that organizations rely, in large part,
on the data that is controlled, managed, and analyzed by management
accountants should not be lost on management accountants. The challenges that confound management teams across industries and that have
made reporting and compliance more complicated have simultaneously
created numerous opportunities for management accountants who are
proactive and forward thinking.
First, information must be quantified and collected using a consistent
and standardized process. This step, and the underlying decisions and
judgment calls that drive it, can be a difficult, but necessary, part of the
process. Second, the said information must be made comparable to, and
integrated with existing operational and financial data. Third, and arguably
most important, is that senior-level decision makers must have the ability
to analyze, discuss, and explain the information presented and communicated to end users. Stated another way, the information generated and
analyzed from operations, which includes financial information, must be
presented in a format that is understandable even to nonfinancial experts.
Accounting professionals, already embedded in virtually every area of the
organization, and increasingly tasked with assisting with technology and
operational upgrades, are uniquely situated to leverage changes in the
market to accelerate this transition. This transition, from financial reporting expert, to business decision maker, is not a straightforward or simple
concept, but the opportunities available to those p
rofessionals willing to
seize them are substantial.
SMA in a Stakeholder Landscape

Enron, WorldCom, the London Interbank Offered Rate (LIBOR)
rate-fixing scandal, and the financial crisis that consumed the entire globe
are just a few examples of how poor management, poor data quality, and
What Is Strategic Management Accounting? 3
a lack of comprehensive follow through can negatively affect organizations. In the increasingly complicated business environment following
these multiple crises, business management and reporting must evolve.
The underlying business issue appears to be that managerial professionals are uncertain as to how best to address various stakeholder reporting demands. Stated in a different way, there is uncertainty surrounding
the investments in training and implementation of new systems, that is,
will the financial benefits exceed the costs? The specific problem is that
organizations are investing in integrated reporting research and implementation without knowing if it improves financial performance (Roth
2014). One area of guidance is from nontraditional stakeholders, as these
organizations have the potential to more fully integrate the value creation process for organizations, to the benefit of all stakeholders (Garriga
2014). This new paradigm, one of activist stakeholders, requires a new
mindset and framework as to how organizations deploy internal resources
and personnel. Reframing the role of accounting within the organization
allows the finance/accounting function to assist firms in dealing with this
increasingly complicated environment (Skrbk and Tryggestad 2010).
Additionally, there is increasing regulatory and stakeholder interest in
developing standards, and metrics to assist in addressing concerns that
continue to dominate the discussion of the sluggish worldwide recovery
(LeBlanc 2012).
Incidents such as the emissions testing violations at Volkswagen, which
occurred during 2015, demonstrate the continuing need for improved
information, communication, and reporting tools. This applies to both
financial information such as profitability and return on investments
(ROIs), and the operational data that drive the financial results. Management accountants, already embedded within the broader decision-making
process, are uniquely well positioned to assume a more proactive role. It
is important to remember that compliance and other operational information virtually always have a financial bottom-line effect on organizational performance. Linking together operational information, however
plentiful and comprehensive, to reporting systems and methodologies is
not a simple task, and doing so requires the integration of accounting
and accounting systems with other information systems within the organization. Acknowledging the proliferation of stakeholders, the necessity
of increasing stakeholder-oriented reporting, and the increased importance of nontraditional information of business decision making provides an opportunity for accounting professionals. Chief financial officers
(CFOs) are increasingly responsible for not only the financial reporting
and results of the organization, but also for how the organization reports
operational results to various stakeholders. Summarized by Hasan (2015),
the five major categories and areas that CFOs are now held accountable
for include providing accurate and actionable data, bringing speed and
efficiency to the analytic process, leveraging technology (specifically the
cloud), improving the forecasting process, and managing the data security
and risk management of the organization.
Clearly, the role of the CFO, as well as the direct reports of the CFO,
continues to evolve and shift in response to marketplace demands and
realities. Accounting professionals must obtain and refine the skills necessary to not only remain up-to-date on accounting regulations, but also
to take advantage of the opportunities present in emerging areas. Elevating both professionals working in individual organizations, as well as
the accounting profession itself, to a role more akin to strategic business
partner, is a transition that is currently underway. The transition of the
accounting role, however, is merely a symptom of a larger shift in the way
businesses operate, and how organizations engage with each other as well
as with end users.
It can be argued that the only true value that the accounting and
finance functions can deliver to the enterprise is the value of good information, that is, the information that can be leveraged and utilized to
make better business decisions. Transforming operational data into financial information for decision making is a key aspect of business and strategic planning, and accounting and finance professionals must be able to
generate and disseminate the appropriate information to a wide variety
of stakeholder groups. Organizations, regardless of the specific industry
or whether or not they operate on a for-profit basis or as a not-for-profit,
have two primary functions that must be accomplished in order to continue operating on an ongoing basis. First, organizations must create
more resources through operations than those consumed via operations,
and second, organizations must effectively allocate existing resources that
are available to the management team.
Business is much more than simply selling goods and/or services.

Businesses have powerful impacts on both internal and external stakeholders, and this concept permeates the economic theory and concept
of externalities. Linking the somewhat abstract concept of externalities
to a more concrete example, Hiller (2013) argues that there is demand
growing for innovative forms of business and management to help satisfy
the need for comprehensive performance information, adding to pressures already placed on organizations. In essence, this represents a signal
from the marketplace stating that business as usual will not suffice in the
21st-century business environment. As demands grow for more accountability, real-time data and managerial tools, and more flexibility from
businesses, business professionals face an ongoing challenge. How can
the business community satisfy traditional financial stakeholders, provide nontraditional stakeholders with the information they need, and
communicate all of this to the marketplace? Findings and analysis of
existing literature, pertaining to integrated financial reporting, appear to
lend support to such a model as a method to address a complicated environment. Linking corporate governance to business decision making and
financial reporting is an integral aspect of the reporting framework, and
provides a pathway and framework to a higher level of strategic decision
making (Starbuck 2014).
Integrated Financial Reporting
Developed and implemented by the International Integrated Reporting
Council (IIRC), integrated financial reporting, developed, promoted,
and now implemented worldwide, can offer a comprehensive solution
to this business dilemma. Establishing communicative processes for both
the costs and benefits of utilizing integrated financial reporting is an integral next step in the development, adoption, and evolution of integrated
reporting in the financial reporting process (Monterio 2014). Through
the International Federation of Accountants, global regulators, industry
associations, investor groups, and practitioners, this one report integrates
all aspects of business performance. The IIRC, through reports, research
studies, and implementation, has sought to establish an industry definition of integrated reporting. Additional research and data that was
analyzed builds on this analysis, and proposes that integrated reporting

emphasizes the synthesis and analysis of both financial and nonfinancial
data that is material to stakeholders (Abeysekera 2013). Through quantifying and reporting on the impact that nontraditional measures can have
on financial performance, which includes environmental impact, societal impact, corporate governance, and developing five types of capital in
addition to financial capital, an integrated reporting structure quantifies
what has traditionally appeared only in footnote disclosures. Accountants
might frame the argument in this manner: in order for organizations
to realize the full benefits of utilizing an integrated reporting structure,
the organization must utilize certified public accountants and the internal accounting/finance function overall in a strategic manner (Hughen,
Lulseged, and Upton 2014).
Establishing such a quantitative relationship between organizational information, including aspects of corporate governance, and
the effect that such items have on financial performance, is a critical
connection toward the development of integrated financial reporting.
Drilling down, an integrated financial report represents a more comprehensive and holistic view of organizational performance, but in order
to fully reap the benefits of such a framework, qualitative information
must be presented in a logical and consistent manner. Bringing together
elements of both financial and nonfinancial data represents an opportunity and a challenge, however, for both preparers and users of these
reports. Virtually by definition, quantifying and reporting on nonstandardized information such as items related to corporate governance is a
multifaceted endeavor.
As it relates to emerging areas of importance for management accountants and organizations in general, the linkage between concepts such
as integrated reporting and the information required of organizations
is readily apparent. Moving beyond the reporting requirements themselves and understanding the integrated reporting framework are critical
for both the proponents of integrated financial reporting and organizations wishing to examine the concept in more detail. In essence, moving
beyond integrated reporting and realizing the implications of this concept
necessitate an understanding of the six types of capital that underpin the
theory: financial; manufactured; natural; intellectual; human; and social
and relationship capital (Jhunjhunwala 2014). Analyzed in more detail

throughout this text, a multiple capital model is a critical concept for
management teams to understand, utilize in business decision making,
and apply to the strategic planning process.
The ability to leverage and build on the inclusion of multiple types of
capital into existing reporting frameworks is an essential aspect of what
SMA actually means. Reporting and analyzing information from multiple perspectives, and understanding just how these different types of
information drive organizational performance, are imperative in a business environment that is increasingly driven by factors outside of traditional business areas. Incorporating nontraditional types of information,
qualitative data, and embedding this information in the decision-making
process is no simple task. It is, however, one that increasingly appears
to be necessary in order to successfully navigate and succeed in a fast-
moving business environment. It is critical, however, that any discussion
or analysis of integrated financial reporting and the feasibility of a doption
of integrated financial reporting include an analysis of the multiple c apital
aspect of integrated reporting.
Accounting professionals already have the existing skills and abilities
necessary to quantify and report on disparate types of information, and
integrated reporting is simply an extension of existing skills and aptitudes
to address new market requirements. In place of developing entirely new
skills and competencies, the much simpler task facing the profession is to
simply refine and further develop existing skill sets to meet the needs of
the marketplace. Simultaneously, as the utilization of nontraditional and
integrated reporting has increased, the accounting profession continues
to evolve and change into a role more akin to strategic partner. This convergence and simultaneous rise in the consciousness of both researchers
and practitioners do not appear to be a coincidence. As increased scrutiny
is brought to bear on organizations from an increased number of angles,
it is relatively straightforward to conclude that better and more consistent information is necessary. Accounting professionals, tasked with roles
linked directly into the production and dissemination of organizational
information, are well positioned to elevate their contributions accordingly. After appearing to have receded from discussion and research, the
concept of SMA has resurfaced.
Stakeholder Reporting
Stakeholder reporting, mentioned previously as an introduction before
being expanded upon later, is the theoretical underpinning of both integrated reporting and SMA. Stakeholder-oriented reporting is, almost by
default, a broad-based approach to dealing with the necessities of the
post-financial crisis business environment. In an environment increasingly driven by both financial and nonfinancial information, a more
integrated accounting team is necessary to satisfy decision making
criteria. In order to accurately evaluate and judge both the management

of the organization and organizational performance, it is imperative that
end users have access to financial data as well as to information that has
financial ramifications. Put simply, stakeholder reporting, as a theory,
supports the concepts and tactical applications of reporting linked to
sustainability, corporate governance metrics, and how risk management
plays a role in strategic decision making. Coupled with the increasing
digitization of information and the connectivity that now exists between
organizations and customers/stakeholders, the implications are profound.
In order to succeed and thrive in a business environment that demands
larger amounts of information focusing on a broader range of areas,
organizations must be able to produce and communicate information on
a timely basis.
Business continues to increase in terms of both complexity and speed,
and these trends have a direct effect on the accounting profession. Information and management decision making occur on a continuous basis,
and have ripple effects that span the globe. One prime example of a stakeholder-oriented mindset applied to the marketplace is that of Boeing,
a multinational aerospace organization that engages with corporations,
governments, and NGOs on an ongoing basis. Analyzed by Carlon and
Downs (2014), Boeing integrated the concepts of stakeholder reporting
and valuation into the financial reporting process in a material way, with
significant financial benefits. In addition to the changes necessary to
create and support stakeholder-oriented data, the organization realized
increased transparency and insights into just how costs and revenues associated with R&D, customer retention, and environmental compliance
affect the organization. These items, which are just a few of the many
factors that drive organizational performance, clearly require analysis and

understanding in order to best manage the organization and create value.
Stakeholder reporting is not a new concept or idea, but the proliferation of reporting demands and requirements placed on organizations has
led to a reinvigoration of the stakeholder concept. As businesses and organizations are held to higher standards across a broad swath of financial
and nonfinancial aspects, it is readily apparent that organizations must
be able to quantify, report on, and analyze information that comes from
a number of sources and is distributed to a large audience. Information,
specifically quantitative data, forms the foundation of business decisionmaking and planning, but the data must be organized and presented
within a qualitative framework. Especially as nonfinancial stakeholders
received more information on a recurring basis, the importance of linking
together qualitative and quantitative information is difficult to overstate.
The very essence of stakeholder orientation and reporting recognizes
the following realitythe business landscape has changed and become
increasingly oriented toward a multiuser model of financial and operational data. Embracing this fluid and dynamic landscape necessitates that
accounting, finance functions, and the individuals who work within these
functions embrace a more comprehensive and holistic view of the role
accounting plays. Instead of merely reporting historical financial information to a narrow group of creditors and equity holders, accountants
should truly become masters of data and data analysis. In order to successfully manage this transition, however, accounting professionals must
be willing and able to approach work, workflow, and processes in a more
flexible and forward-looking manner. Framed in a slightly different way, if
accountants want to play a more proactive and decisive role in the strategic decision-making process the management accounting function must
become more strategically oriented.
Strategic Management Accounting & Integrated

Reporting
SMA represents the transition of accounting services and accounting professionals from the role of historically oriented record-keepers to that of
action-oriented professionals who assist in senior-level decision making.
10
Increasing digitization of the global economy has influenced virtually

every type of organization, and business leaders are now expected to be
well versed in the various types of information produced and collected by
their organizations. Increasingly, it is becoming clear that organizations
best able to make use of information will be the organizations best positioned to succeed, such as Amazon, Google, and retailers such as Kohls.
Strategy, drilling down to the core issue and ignoring labels or characterizations such as disruptive innovation or blue ocean strategy, is based on
quantitative data. Specifically, strategy is a qualitative activity or idea that
is heavily dependent on data, that is, quantitative information. Data, and
the insights that can and should be generated from the data collected by
an organization, are what enable senior-level decision makers to make
appropriate choices and selections for the organization moving forward.
That said, simply being able to generate and analyze organizational
data is insufficient from a strategic planning perspectivethe information must be able to then be used to develop action-oriented business
activities. In order to develop and execute a cohesive organizational strategy, business decision makers must be able to integrate the following
three areas. First, data must be generated consistently and reported in
a format that is understandable and useful to the end users. Second, the
financial implications of nonfinancial data, such as information related
to environmental compliance, governance metrics, and broader changes
in the business landscape, must be clear and communicated throughout the organization. Third, and arguably most important, is that such
information must be incorporated into any discussions or plans related
to strategic initiatives, plans, or expenditures. Better information, and
information that is understood by all parties, is a key driver of effective
decision making.
In spite of the apparent widespread acceptance and agreement regarding the importance of the transition of accounting professionals to thinking and behaving in a more comprehensive and strategic manner, the
market realities of the situation are far from consistent or altogether positive. Several ways in which management accounting appears to be playing
a less relevant role in both the academic and practitioner communities
include less representation in MBA programs, fewer scholarly outlets and
publications, and a perception that management is less a broad-based
competency than a specialized niche (Krishnan 2015). Such perceptions,

limitations on the profession, and management accounting specifically,
must be combated with vigor by proponents and supporters of a more
strategic management function. Linking together management accounting and organizational decision making is a critical next step that must
take priority as business continues to evolve and move forward.
SMA, in essence, represents an evolution and transition of accounting and financial professionals from financial reporting and analysis to
the role of predictive analytics and forecasting information for business
decision makers. Being able to make best use of the increasingly digitized information, and the real-time demands of stakeholders with regard
to information and data-driven decision making, require that organizations become proactive in how they address and integrate informational
requirements into business decision makers. It is up to the individuals
working within the profession to embrace the changes occurring within
the industry, and integrate existing skills into the developing needs of the
broader business community. Whether the strategic initiative is related
to information technology, nontraditional financial reporting, or getting better analytics out of existing data, the underlying message is the
same; accountants must think more strategically about the role they play
within the organization. In order to execute this transition smoothly,
the accounting professionals attempting to evolve into strategic decision
makers must be able to integrate a wider variety of information and decision requirements on a continuous basis.
Integrated reporting, and the different aspects included within this
framework, can be linked directly to a more strategic accounting function.
Regardless of specific industry, it is increasingly clear that financial and
accounting professionals are tasked with operational and strategic decision making. Involvement in strategic planning, capital budgeting, operational efficiencies, and developing reporting templates for dissemination
to both financial and nonfinancial stakeholders, result in management
accountants being embedded within critical areas of the organization. In
addition to the quantitative data and metrics that form the foundation of
decision making, it is important to be able to understand the qualitative
foundation underpinning the information. Since management accountants are currently involved in the gathering and analysis of data, it is
12
logical to conclude that these professionals will have the ability to explain
this information to both internal and external users. The ability to articulate, explain, and connect to the broader business issues at hand are
key characteristics of strategic thinking. Accounting professionals must
embrace such a mindset to evolve and elevate the work product currently
produced. Two specific areas of importance to integrated reporting and
SMA are corporate governance and sustainability.
Strategic Management Accounting & Governance
Linking back to the concept of integrated financial reporting and several
of the critical components therein, specifically corporate governance and
sustainability matters, management accountants are already involved in
updating and improving reporting and disclosures to external stakeholders. Yahoo, the U.S.-based e-commerce organization, as well as Alibaba
are both examples of how corporate governance concerns can significantly
affect financial performance and managerial concerns. Under new leadership, Yahoo, beginning in 2013, embarked on a string of high-profile
acquisitions and personnel hiring that led to increased scrutiny as core
operations continued to grow sluggishly, and eventually became stagnant
in 2014 and 2015. During this time, up until the end of 2015, sluggish
operations and lackluster management results were overshadowed by the
significant ownership stake held by Yahoo in the Chinese e-commerce
giant Alibaba. Complicating the situation further, disclosure of a 2014
data breach was only made public in 2016, jeopardizing the potential
sale of Yahoo to Verizon. Following the IPO of Alibaba, however, investors were able to invest in Alibaba directly instead of purchasing Yahoo
shares as a tracking tool. The increased scrutiny combined with a lack of
management strategy and narrative led to a depressed valuation of the
organizations shares. The fate of a once cutting-edge Internet and technology organization boiled down to whether or not the core assets of the
business could be sold off to a larger telecommunications organization
or to a private equity organization. Better governance and governance
data management might not have been able to prevent this, but it would
have at the very least made analysis simpler and less complex through
improved communication and data clarity.
Corporate governance represents how organizations interact with

both internal and external decision makers and partners, and is an
essential area in which accounting professionals can add value to the
decision-making process. Interacting with stakeholders, both financial
and nonfinancial in nature, requires that the information produced and
disseminated to users be consistent, robust, and comprehensive in nature.
Developing and implementing policies and procedures to create and
authenticate the information produced by accounting systems and organizations align with existing strengths of the accounting function that can
be leveraged and extended to governance reporting and analytics. Communicating clearly and consistently with stakeholders represents an area
of competitive advantage in a business environment increasingly focused
on information and real-time communication. In addition to clearly
communicating and disseminating information, the creation of reports,
dashboards, and analytics linked to corporate governance is a clear way in
which accountants can add tangible value to the organization.
Corporate governance, highlighted by periodic organizational failures and episodes of mismanagement, has clearly evolved and adapted
over time to changing marketplace conditions. Implementation of legislation such as the Sarbanes-Oxley Act and Dodd-Frank Act, coupled
with increasing pressure from activist investors and other stakeholders,
has resulted in a reassessment of what specifically governance means in
terms of management research (Tihanyi, Graffin, and George 2015). As a
result, besides the additional regulation and informational requirements,
the concept and implications of corporate governance for management
teams have become increasingly complex. Such complexity, however,
provides an opportunity for management accountants willing to think
creatively about how to best leverage existing skill sets.
Improved accounting and management of the corporate governance
process, while unable to solve the core issues plaguing Yahoo operations,
would have enabled the organization to more effectively communicate
both the issues being faced, as well as managements plan to address these
concerns. While Yahoo has been the focus of this discussion, the principles
and tactics can and should be applied to any organization facing increased
competition, organizational change, or a change in organizational strategy.
Communicating and disseminating information to interested parties in
14
a clear, consistent, and logical manner is essential for effective business

decision making. Market-based support for a more quantitatively based
and proactive approach to corporate governance analysis is demonstrated
by the growing discussion around corporate governance, as well as the
proliferation of analytics related to corporate governance.
Specifically, as it pertains to successfully addressing activist investors
and other critics of managerial and board practices, the more quantitative
data that can be brought to bear, the stronger the argument becomes.
Organizations are in need of professionals willing to improve the consistency and quality of governance information, and accounting professionals appear to be uniquely positioned to accomplish such goals. Recent
public debates regarding the growing importance of governance as it
relates to doing business overseas, succession planning, executive compensation, and the strategic planning of the organization are clear indicators that the need for such information will only increase.
Strategic Management Accounting & Sustainability
Sustainability is an ongoing issue that is of increasing importance for
organizations operating within mining, timber, or other extractive industries, but the scope of sustainability and environmental reporting continues to expand. While carbon dioxide levels, water treatment solutions,
and safety controls to prevent leaks and spills are relatively high-profile
utilizations of sustainability accounting, there is much more occurring in
these areas, which is bringing these areas increasingly into the spotlight.
The Sustainability Accounting Standards Board (SASB), a not-for-profit
organization located in San Francisco, has been working, since 2011,
to develop and communicate sustainability accounting standards for
publicly traded organizations. Differentiating itself from optional standards and assurance previously issued and still in existence within the
marketplace, the standards developed and communicated by the SASB
are specific, quantitatively driven, and comparable between different
organizations operating within the same industry. Such development, of
assurance and reporting standards that are based in quantitative data as
opposed to purely qualitative description, is an area where management
accountants can assume a decisive leadership role. Standardization and
consistency represent two logical areas for which accounting professionals

apply existing skills and competencies in order to improve existing workflows and informational results.
Building on these themes of developing quantitative metrics, it is
interesting to note the strong similarities that exist between financial
reporting and assurance standards, and emerging areas of strategic importance. Many of the same challenges associated with reporting and assurance standards, namely consistency and comparability, are very similar
to the challenges that nontraditional areas face, such as corporate governance, sustainability, and risk management practices. Organizations
and users of organizational information require that the information
presented to them be consistent, comparable, and relevant, akin to the
requirements associated with financial information that is currently disseminated to end users. Management accounting professionals can leverage existing skill sets, knowledge, and placement within the organization
to assist with the development and communication of these badly needed
standards. Robert Eccles, considered by many researchers to be an authority on this issue, summed up the conversation by stating that whether or
not the standards are industry specific or overall standards, establishing
that such standards will greatly assist with the adoption of sustainability
reporting standards.
Linking together research from thought leaders such as Eccles with
market realities, it is clear that a definitive need exists for standardized
financial reporting, metrics, and frameworks as they relate to sustainability and organizational performance. Framed in the context of a case study
instructional tool, the primary challenges associated with sustainability
reporting and information consist of a nonexistent reporting framework,
minimal assurance standards, and a dearth of industry-wide practices
(Bouten and Hooze 2015). Stated in such a way, framed as almost a case
study problem to solve, it presents benefits to organizations seeking to
improve current reporting on such measures. Namely, by outlining the
current situation, outstanding issues, and ideal ending place, it provides
structure, clarity, and a familiar way to approach the issue. This is essential when dealing with an issue, such as improving reporting, that can,
at first glance, appear to be overwhelming. It is interesting to note that
many of the same issues raised by Eccles, namely the lack of standards and
16
reporting tools, are also raised as critical areas of concern for educators and
future members of the accounting profession. Building bridges among
academics, practitioners currently in the field, and upcoming members of
the profession is an essential step in developing and maintaining the concept of SMA and fully realizing the implications of such a methodology.
The connection, among research, academia, and practitioners working in industry, is an important partnership to develop and maintain.
Stepping back from the discussion at hand, the accounting profession
faces a somewhat frightening set of circumstances. First, the profession as
a whole, both in the United States and abroad, is facing a significant graying risk, that is, the average age of accountants is increasing faster than
before. Compounding this situation are both the growing competition
for analytic and financial information, and a growing prevalence among
accounting and finance students to not actively pursue certifications. In
order to effectively combat such trends, this partnership must be able to
present a viable career path with a multiplicity of options. SMA, and the
options therein, provide options that are appealing in both the current
and future marketplaces.
Even organizations that do not, at first glance, have a large environmental footprint such as service or technology organizations, can benefit
from integrating sustainability into the accounting and finance practices
used by the organization. In addition to the informational benefit of
improved insights regarding sustainability initiatives, virtually every organization can receive a financial benefit from integrating sustainability into
operations and management practices. Understanding the cost/benefit
ramifications of renewable energy or sustainability-oriented projects
should be of top priority for senior management teams across industries.
This increasing importance provides yet another opportunity for strategically oriented and strategically minded accounting professionals to align
themselves with higher level analytics and decision making.
Taking a Deep DiveIntegrated Reporting & Strategic

Management Accounting
Business operations, such as an automobile or any professional sports
team, are an amalgamation of pieces, people, and processes. The
organization or entity will not be able to function at optimal capacity if

certain pieces are not working in harmony with the other aspects of the
organization. The same can be said of organizational reporting and performance. Business operations, from a holistic point of view, and regardless of whether the entity is managed as a for-profit or not-for-profit, have
a common objectiveto produce more resources than are consumed via
ongoing operations. Without achieving this goal consistently over time,
the organization will cease to exist. It is with this overarching theme in
mind that an analysis of how different concepts and theories interact
should be examined. Theory and theoretical constructs are, of course, an
important part of management and should be integrated into the business
decision-making process, but the ideas and concepts discussed should also
be adding value to the organization.
As the business landscape continues to evolve and change on an ongoing basis, it is imperative that management professionals, and specifically
accounting professionals, understand the differences between short-term
interests of the market and more substantive paradigm shifts in how organizations conduct and report operations. Due to the changing nature of
information, and pace of business, accounting professionals must integrate strategy into the analysis process. Particularly since the financial
crisis of 2008, market analysts and commentators have speculated and
discussed about how best to manage organizations that simultaneously
publish quarterly earnings while also providing proper stewardship of
assets for long-term growth. Assuming a stewardship role and mindset
is something that should be reinforced at both the director and senior
management levels of the organization. That said, developing and maintaining such a mindset is inevitably easier to articulate than to put into
placemanagement accounting data and reporting can produce reports
and templates that assist with this process.
Throughout the discussion and analysis surrounding a more strategic
accounting function and the implications that such a change will have on
organizations as well as the profession, the end users must remain of paramount focus. If the data and information produced to address the needs
of the organization are not user friendly, or meaningful to end users, the
impact of said reports and information will be diluted. The end users,
and the end use of the data, must remain of primary importance as the
18
accounting function continues to evolve and develop. Integrated reporting, combined with the emerging trends toward a more strategic role for
the accounting profession, lays the broad groundwork and foundation for
such data distribution.
Several areas stand out as particularly applicable to the changing
nature of the accounting profession, including integrated financial reporting, corporate governance, sustainability, stakeholder-oriented reporting
at large, and the increased prominence of SMA. SMA, at the core, is
caused by the transition and evolution of financial reporting from backward and historically focused information to a forward-looking analysis
of ongoing performance. Prior to forecasting the current implications and
future developments linked to these themes, however, it is critical that a
deeper dive be conducted on integrated reporting and the implications
therein. Understanding both the concepts themselves, and more importantly, the linkages between them, creates a superior level of understanding and ability to critically analyze both the concepts and the implications
for accounting professionals. Put simply, in order to truly understand the
implications of SMA and IR, it is practical to revisit them and examine
how, specifically, these topics fit together.
Integrated ReportingImplications
Integrated financial reporting, often abbreviated with the acronym IR,
represents both a new framework for financial reporting and an evolution related to how organizational information is communicated to
financial and nonfinancial shareholders. Traditional financial reporting,
characterized in U.S. markets by the reference markers 10-Q, or 10-K,
is designed and prepared for a limited group of end users, specifically
shareholders or creditors. Presented in a standardized format, consisting
of standardized components, the information contained within these
reports is dense, quantitative, and technical in nature, focused on events
that occurred during the previous quarter or annual period. Such consistency, related to both the information contained within the reports as
well as the framework of the reporting, provides several benefits to end
users. First, the information contained within the financial statements
is consistent and comparable with prior periods. Second, regardless of
industry or management preference, the same information is compiled

and presented, that is, the disclosure involved in preparing traditional
financial reporting assists the end users objectively evaluate organizational
financial performance. Lastly, the regularity of communication means
that end users have information delivered to them on a periodic basis.
Such timeliness assists in the business decision-making process.
In essence, and a method that can be used to best utilize the concepts of integrated financial reporting, is the development and usage of
integrated thinking in the workplace. Integrated reporting, by default,
encompasses a broad and interconnected view of how information connects to business performance in the current period and toward future
opportunities. The benefits of such an outlook are relatively straight
forward to see from a managerial point of view; the nimbler and forward-
oriented an organization is, the easier it will be for that organization to
be proactive toward new opportunities and challenges. Several steps, outlined by Hagel (2014), that accountants can take to develop an integrated
thinking mindset include the following. First, develop clear explanations
for positive and negative impacts broader trends will have on the organization. Second, be sure to link financial and operational data points to the
broader strategic concepts and realities facing the organization, and third,
be holistic in reporting and analysis, so that decision makers understand
the ramifications of your analysis.
That said, there are significant deficiencies with the current financial
reporting structure that may prevent management professionals from
making the best possible decision. First, and perhaps most important,
is the historical nature of the information contained in these reports.
While compiling and reporting on financial information, which is often
affected by estimates, judgment, as well as auditor opinion and advisement, is a time-consuming initiative, the lag between when the data is
generated and communicated to shareholders can be quite large. For
example, it might be a full three months before financial information
is released, in its final form, to shareholders. In a business environment
where decisions are made on a rapid basis, this is unsustainable. Second,
the presentation and information contained within traditional financial
reporting, while appropriate and applicable for financial shareholders,
requires a certain degree of financial knowledge and sophistication to
20
understand and interpret the data correctly. These requirements limit the
usefulness of the data, and limit the positive benefit of communicating
such data. Third, and of increasing importance, is that traditional financial reporting does not contain information related to emerging areas of
importance. While depending on the industry or organization in question, the specific areas of investor focus may vary, the realms of corporate
governance, sustainability, and integrating risk management into strategic planning are of growing importance for business decision makers
across the board.
What integrated reporting attempts to do is twofold, and these two
parts are interdependent on each to succeed. First, integrated reporting,
at the core of the concept, represents an evolution of financial reporting and communication to include elements of nonfinancial information
and provides this information on a more real-time basis. Management
accounting professionals are obligated to both fulfill these needs and to
assist in the business decision-making process. Organizations are increasingly interconnected to, and held accountable by, the environments in
which they operate, and stable and productive relationships are dependent on open lines of communication. Akin to how poor or inconsistent
communication can hamper an individual department or organization,
poor communication between an organization and its stakeholder base
can have a detrimental effect on the organization. These ramifications,
focused on the external benefits and attributes of integrated financial
reporting, are merely what is presented externally to the marketplace.
In order to produce and sustain such a reporting framework, however,
substantive changes must be undertaken and embraced within the
accounting function to account for the increased demands placed on the

organizations information systems.
In order to best leverage the implications and possibilities e mbedded
within the integrated reporting framework, however, accounting
professionals cannot approach the situation as business as usual, from a
strictly financial reporting orientation. Accounting and other financial
professionals seeking to make the best use of integrated reporting and
the variety of points of view included within the report must approach
the idea of financial reporting from a much broader and comprehensive
point of view. The linkage and connection between integrated reporting
and SMA are clear and readily apparent to those seeking to connect the
concepts. While SMA is akin to a conceptual framework and base from
which to further develop ideas and plans of action, the structure of integrated financial reporting provides a vehicle within which SMA can grow
and develop. Put simply, SMA is a theory that was in need of a more
quantitative framework to assist with communicating the concept itself,
as well as in implementing the ideas of SMA within organizations.
Guidelines
To best sustainably produce and disseminate such information it is logical
to utilize internal resources currently tasked with the creation, dissemination, and maintenance of information to external users. Management
accountants are already involved in the production of the raw information contained in traditional financial reports as well as the finalization of
the presentation that is communicated to end users. Familiar with quantifying information, creating templates that are clear for external users to
understand and developing metrics to benchmark against and compare
results, management accountants are well equipped to address the challenges inherent when implementing an integrated reporting structure.
Additionally, and while most clearly evidenced at the CFO level, management accounting professionals are increasingly tasked with information
technology roles, that is, assisting in system upgrades. This experience
and hands-on practice with the development, testing, and refinement of
technology systems provide additional insights into how the organization
operates.
What integrated reporting attempts to accomplish, in short, is to
transform into reality the concept that the management accounting function is, in fact, comprised of multiple layers and responsible for multiple
directives from management. Finance holds multiple roles within organizations, and influencing decision making in a wide variety of waysonly
some of which are readily apparent to external users of organizational
data. Two specific areas influencing and impacting the role of the finance
function and organizational effectiveness have to do with the general
operating environment and the increasing integration of information
technology and accounting (Hsihui, Ittner, and Paz 2014). Emerging
22
linkages and connections such as these, particularly the greater connection between IT and accounting, hold profound implications for the profession. Integrated reporting and SMA at large require that accounting
professionals have access to greater quantities of organizational data as
well as the ability to make sense of such information. Expanding on these
themes is a core directive of proponents seeking to promote and expand
SMA within the profession. Reporting, to both financial and nonfinancial reporting stakeholders, requires that information is collected and
presented in a consistent format that makes sense to the end users. Leveraging existing strengths of the profession to meet the varied needs of
stakeholders, in conjunction with an integrated reporting framework,
provides a clear and market-oriented path that management accountants can take to amplify professional strengths while also moving into a
more strategic role. While every organization is different, the following
guidelines and principles should be factored into the implementation of
a more SMA function.
1. Link strategy, operations, and reportsdisseminated to end users
by producing the breadth of information, and distributing it in the
appropriate venue for each stakeholder group, that modern marketplace conditions dictate.
2. Connect information with the front and back endorganizations
have vast quantities of data, but must be able to interpret and efficiently glean business insights from this information.
3. Understand what integrated reporting representsif stakeholders request additional information and analytics on sustainability or
governance, an IR initiative provides an opportunity to proactively
develop such areas.
4. Focus on what the information illustratesreporting, regardless
of form, is a business necessity, but that does not mean it should
be treated only as an expense item if management can leverage the
information into insights and business actions.
5. Look forwardinsights into risk management, supply chain operations, and the needs of stakeholders, including customers, provide a
roadmap for decision making moving forward: management should
use the map.
A challenge that many organizations face is that, while the information exists within the organization, the procedures for extracting that
information and making it usable for business decision making is not
ideal. Developing procedures, reports, and templates to collect information from business operations should be an optimal focus for management
teams. Without quality information, it is next to impossible to successfully execute plans at either the tactical or strategic level. Management
accounting professionals are often already embedded within functional
silos of the organization, and have experience interpreting operational
data into financial information, and this is the core of what SMA represents. In essence, and specifically as it pertains to integrated reporting,
the underlying focus of SMA is the ability of accounting professionals to
take operational results, data, and metrics that are generated by the organization, and translate those into financial or other quantitative information that can be used to make informed decisions. The true value, and
role of SMA, however, is not simply in creating information to be used by
othersit is the interpretation and utilization of the information itself.
Integrated ReportingThe Multiple Capital Model
Embedded within an integrated financial report, and critical to the differentiation of this reporting model from traditional financial reporting, is
the fact that the reporting framework introduces multiple types of capital.
The six capitals, and the ramifications of the inclusion of this information
is reporting, is a subject of analysis and debate in both academic and
practitioner fields. In addition to existing scholarly literature, there is a
growing amount of practitioner- and market-based research on the six
capitals, the implications therein, and methods by which accounting professionals can utilize such a multiple capital model. Virtually by default,
the materials proposed by such a model include quantitative data as well
as qualitative information.
Implications associated with the multiple capital models, as they are
linked to the concept of SMA, are difficult to overstate. The reality of the
situation is that organizations are judged increasingly by not just how
they perform on a financial basis, but how sustainable and comprehensive that performance truly is. A multiple capital model provides a way in
24
which organizations can communicate this much broader set of information to stakeholders doing so in a format that is logical, consistent, and
meaningful to the individuals and organizations receiving this information. That said, the responsibility for implementation and maintenance of
such a multiple capital model lies with the management accounting professionals seeking to benefit from it. Arguably, the most important step
in developing and sustaining integrated reporting and a multiple capital
model to support it is for the management accounting professionals in
charge of implementation to ask the correct questions.
Focusing on which questions to ask which people is perhaps not the
most accurate way to characterize this important step. Rather, it is the idea
that accounting professionals must think creatively and in a nontraditional manner in order to effectively address the challenges and opportunities that are embedded within the implementation phases of a multiple
capital model and a broader integrated financial report. In order to achieve
a more strategic role in the organization and organizational decision-
making process, it is logical to suppose that management accountants
must embrace a more strategic mindset. That said, it is also important to
take into account the difficulty of the reality of attempting to think strategically in a manner that also makes business sense during the day-to-day
bustle of the organization. The multiple capital model embedded within
an integrated financial report provides a way for management accountants
to think strategically in a way that makes logical sense.
The Evolution of Strategic Management

Accounting&Integrated Reporting
At the end of the day, the true value brought to bear by the accounting
function to an organization lies with the information that the function can
produce and disseminate throughout the organization and to appropriate stakeholders. Framed against this market challenge, the real question
and the critical link between integrated reporting and SMA begin to take
shape. On one hand lies the traditional source of competency and professional expertise of management accountantsquantifying and reporting
financial information to management and external users. Simultaneously,
and without impairing the quality of the financial information produced
and reported by the accounting function, management accountants must

also be able to think, speak, and act in a broader context. Accomplishing
this task without losing focus, direction, or sacrificing quality is no simple
task, and requires a deep understanding of what attributes of integrated
reporting can be used to amplify the effect and potential of SMA.
Using the Multiple Capital Model
Discussed previously, the six types of capital included within an integrated
financial report include financial, manufactured, social and relational,
intellectual, natural, and human capital. The underlying question of SMA
is how should management accountants go about using this multiple
capital model to create and sustain a more proactive and strategic accounting function? The answer lies with the concept of the capitals themselves,
that is, how can management accountants quantify the potential risks and
opportunities that these capitals represent to the business? Organizations
face increasing scrutiny from financial and nonfinancial stakeholders, and
it is imperative that management teams have the information at hand
to address and deal with the many situations that continuously arise in
a multi-stakeholder world. Using internal accounting personnel to help
verify, clean, analyze, and report on organizational data is a cost-effective
measure that can generate true ROI for the organization.
At this stage, it seems appropriate to visit the definition of capital, and
how this term is used in managerial conversations. Traditionally, capital
is perceived and viewed as simply the financial resources that the organization has produced and retained as a result of continuing operations.
While sufficient, this is an incomplete view of capital in a stakeholder
environment. Capital, viewed in a more comprehensive light, reflective
of the evolving business environment, represents the resources available
to an organization that enable the organization to accomplish objectives.
The importance of ranking, quantifying, and reporting on different types
of information crystallizes in light of this refined interpretation of what
capital means to an entity.
Beginning with the concepts of human, social, and relational capital
might seem like an unusual place to start an analysis, that is, these capitals would appear to be among the most qualitative of the six present in
26
an integrated report. When viewed through the lens of broader corporate governance issues, however, the importance and relevance of these
capital classes to business decision making become increasingly clear.
Brought to the forefront of many firms via activist campaigns and other
shareholder-driven calls for change, corporate governance focuses on how
the organization interacts with internal and external stakeholders. Often,
an argument underpinning an activist campaign focuses on the fact that
initiative, or entire business segments, are operated in a way not in the
best interest of shareholders. While the stakeholder-oriented model of
reporting and management is increasingly acknowledged in both academic and practitioner press as reality, it remains a challenge to convince
many management decision makers. Developing metrics and benchmarks would help make this case and proposed model much stronger and
easier for organizations to adopt. Fortunately, there are trends, organizations, and items occurring in the marketplace that can assist management
accountants seeking to develop a strategic accounting model.
Quantitative versus Qualitative
While it is a reasonable statement to say that business decision making is,
for the most part, driven by quantitative data, statistical information, and
statistics that can be tested and verified, it is also important to remember
the importance of qualitative data. Qualitative information, and more
broadly, the ability of management professionals to understand, discuss,
and explain the data produced by the organization are essential. Simply
distributing reports of financial information is not enough. Explanations
and a narrative must accompany that data to make it useful for business
decision making. This concept, the necessity of explanation and a supporting narrative structure, is even more critical for emerging areas such
as governance, sustainability, and the integration of risk management into
the planning process. Developing metrics and deciding what to measure,
of course, is a significant area in which management accountants can add
value to their organizations. In order to develop metrics to quantify such
information, however, management accountants as well as other decision
makers must understand the purpose of gathering such information. In
essence, in order to produce key performance indicators, the first step is
to develop and test key performance questions, which in turn drive the
data collection, analysis, and reporting undertaken by the organization.
Understanding what questions to ask, and how to integrate the needs
for information into standardized metrics and tools requires a strategic mindset, or strategic headset. Inherently qualitative in nature, the
meaning and purpose of strategic headset is relatively straightforward.
In order to best guide the organization forward, the key decision makers must have a strategic plan or orientation for the organization. Formulating and walking the strategic plan through the various necessary
iterations is inherently qualitative, that is, this process requires the ability
to think holistically about the organization and to articulate positions
and views. That said, in addition to being able to think and articulate
positions clearly, strategic thinking and planning are supported by quantitative information. How this information is obtained, however, is by
asking the correct questions and being aware of how to start formulating
those specific questions. Embracing the strategic headset, in and of itself,
requires that accounting professions broaden the scope of thinking and
consideration, that is, they must be aware of factors outside of traditional
accounting and finance thought that influence business decisions.
Linking together the required pieces of qualitative and quantitative
information is a key aspect of both organizational decision making and,
specifically, the development of an accounting function well situated to
compete and provide value in an increasingly globalized and competitive
environment. Connecting the dots specifically to the idea and implications of integrated financial reporting, Cohen, Holder-Webb, and Zamora
(2015) expand existing research and findings related to the inclusion of
nonfinancial information within a broad and more inclusive framework,
the essence of integrated financial reporting. While the particular section
of nonfinancial information examined is corporate social responsibility-
linked data, the ramifications of the research can and should be applied
to the broader field of nonfinancial data.
Building the bridge between the quantitative source data, or foundation, and the surrounding narrative or qualitative information forms the
foundation of strategic thinking and planning. Utilizing integrated financial reporting, including aspects of sustainability, corporate governance,
and risk management in the information disseminated to stakeholders
28
provides accounting professionals with a vehicle to link quantitative and

qualitative together. Linking these concepts together is part of what forms
the strategic headset, or the lens through which strategically oriented
accounting professionals should view the organization and competitive
environment. Integrated reporting, it appears, provides a method by
which accounting professionals can apply strategic thinking and ideas to
different organizational problems that continue to be issues for management teams at large.
Integrated Reporting and the Strategic Headset
Linking together the concepts of integrated reporting and the strategic
headset underpinning SMA is a critical aspect of building the bridge
among the changing business environment, increased demands on organizations, and the transition of the accounting profession to that of
strategic decision maker and business partner. Virtually by default, strategic thinking requires that management integrate a wide scope of information, possibilities, and areas of thought that will influence and help
shape organizational strategy moving forward. That is no coincidence,
and while nontraditional reporting has been a topic of conversation for
decades, the rapid increase in both discussion and adoption of nontraditional reporting methodologies in recent years is a result of market forces.
Formulating an integrated report requires an overhaul of how the
organization processes, collects, and analyzes information. Beginning
with financial information that forms the basis of external reporting, a
differentiating factor of integrated financial reporting is that the information must be analyzed and presented on a continuous basis. In other
words, to best serve the needs of stakeholders and internal decision makers, the organization must be able to communicate financial results on a
timelier basis than is done currently. Thinking strategically about both
the needs of internal management decision makers as well as what external users require to make informed decisions provides an opportunity
for management accounting professionals. Working with the information technology and finance functional areas, management accounting professionals should take a leadership role in the development of
reports, system functionality, and template development in order to get
this information finalized in a shorter amount of time. Developing and

testing these systems provide accounting professionals with several benefits. First, gaining hands-on experience with how information is generated and collected throughout the organization provides management
accountants with additional insights related to business performance.
Second, and arguably more important for the purposes of analyzing
SMA, is the position in which taking leadership in these areas places
accounting professionals.
Highlighting the connection between integrated reporting and a more
strategic approach to accounting at large, Cheng et al. (2014) outline two
specific areas for future research that appear to be especially applicable.
First, the multiple capital model and concept embedded within the integrated reporting construct presents an opportunity for future practitioner
research with far-ranging implications. Creating metrics, reports, and key
performance indicators to measure, evaluate, and report on organizational
performance will necessitate an accounting function increasingly oriented
and focused on organizational performance framed within a comprehensive framework and perspective. Second, and more important to current
implementation, is the fact that by using an integrated financial report,
organizations, virtually by default, are asking that the accounting and
finance function embrace a longer term view of the organization and
organizational performance.
Adding value, in a strategic sense to the organization, requires that
creativity and innovative thinking be encouraged with the management
accounting function. From customers to internal management, there is a
need and market demand for new solutions to existing problems. Integrated reporting, in and of itself, is simply the end result of an iterative
process that has been ongoing for several decades, and does not represent
an ultimate solution. The path to the solution that is of such demand
in the current global business market is to see the proverbial big picture, understand which factors will impact the organization moving forward, and be able to drill down specifically and focus on those areas. In
essence, in the age of transparency and digitization that business leaders
find themselves contending with, organizations must be able to collect,
articulate, and quantify information that previously was not, such as matters related to risk management, governance, and sustainability initiatives.
30
Linking back to the analysis of Cheng et al. (2014), there is one area
in particular that appears to present an opportunity for further integration of accounting into the strategic planning and decision-making
process, and this is the assurance and attestation of integrated reporting. Nonfinancial information and other information included within
an integrated reporting framework are, clearly, a new area of data to be
reported and disseminated to stakeholder groups. Developing and standardizing assurance and auditing standards represent a core professional
competency of the accounting profession, but extending these current
strengths to the new area of nonfinancial information is imperative. In
addition to creating value for the organizations in question, and assisting
management in decision making, such development also provides material for scholarly research and assists in increasing the validity with which
nontraditional information is accepted in the marketplace.
Additionally, information that has been traditionally compiled and
disseminated, namely financial data, must be communicated at a more
rapid rate to meet the growing demands of stakeholders. Integrated financial reporting, strategic thinking, and the strategic headset are interconnected and reflect the same core reality. Business must be flexible and
adaptable to meet the challenges of a globalized world. Now that integrated reporting has been analyzed at a high level, however, it is important
to dig deeper into certain areas to understand just how this data could
impact an organization, and how a more strategically inclined management accounting function can assist and add value to their organization.
Index
Accounting and analytics
accounting professionals, 5556
audit and fraud-detection
procedures, 55
audit process, 4950
big data, 51
business planning, 50
business process management, 51
data experts, 5355
data integrity and reporting, 56
organizational silos, 56
organizational support, 5758
practitioner perspectives, 50
presentation tools and graphics,
136137
regression analyses, 52
stakeholder decision making
exploratory research, 121
information visualizing, 120
key performance questions, 119
presentation, 121
quantitative information, 120
quantitative methods, 119120
stakeholder requirements, 49
strategic headset, 5253
strategic management accounting,
122123
Ambassadorship, 8788
Business process management (BPM)
accounting professionals role, 92
advocacy and campaigning, 86
ambassadorship, 8788
analytics and big data, 89
business decision-making process,
9293
competitive and regulatory
landscape, 91
corporate governance, 8182
digitization, 81
disruption and industry-wide

change, 89
ERP system, 108
integrated reporting, 8285
internal and external stakeholders,
93
leveraging technology, 80
nontraditional and qualitative
information, 77
operations and senior leadership, 91
organizational cohesion, 7980
organizational demands, 76
Porters Five Forces, 8081
process improvement, 7677
project ID, 109
project management, 108109
quantitative financial information,
77
reporting and compliance
requirements, 79
stakeholder reporting, 90
strategic management accounting,
7779
strategic plans, 9091
technology, 76
traditional brand building, 85
transformational shift, 87
variance analysis, 80
workflow and policies, 80
Corporate governance
activist investor perspective, 33
adding value
financial and business decision
making, 37
information technological
services, 3839
managerial slack, 3738
proactive accounting function,
3637
190 Index
ranking and metrics, 34

terminology and frameworks, 34
Alibaba, 12
business process management,
8182
challenges and opportunities, 131
conglomerate structure, 3334
data management, 12
decision-making process, 13
Dodd-Frank Act, 13
dynastic-like governance, 33
GMI ratings, 131
government bailouts, 131
integrated reporting
management accounting
function, 34
managerial implications, 3536
preliminary governance research,
35
qualitative information, 34
sustainability-oriented reporting,
35
interconnected organizations, 34
internal and external stakeholders,
31
leadership, 6667
management structure, 32
market-based support, 14
metrics, 167169
organizational resources, 131
Sarbanes-Oxley Act, 13
social and relational capital,
169170
subcommittees, 32
transparency and disclosure, 32
Volkswagen (VW), 137140
Yahoo operations, 12, 13, 132136
Corporate sustainability performance
(CSP), 44
Corporate venturing, 144
Data-driven decision making
(DDDM)
big data and analytics, 4748
organizational data, 47
strategic thinking and planning,
4849
Dodd-Frank Act, 13
Dow Jones Sustainability Index
(DJSI), 44
Enterprise Resource Planning (ERP)
system, 108
Finance 2.0
accounting
business decisions, 7576
business problem, 7475
information delivering, 74
leadership aspect, 75
business process management
accounting professionals role, 92
advocacy and campaigning, 86
ambassadorship, 8788
analytics and big data, 89
business decision-making
process, 9293
competitive and regulatory
landscape, 91
corporate governance, 8182
digitization, 81
disruption and industry-wide
change, 89
ERP system, 108
internal and external
stakeholders, 93
leveraging technology, 80
nontraditional and qualitative
information, 77
operations and senior leadership,
91
organizational cohesion, 7980
organizational demands, 76
Porters Five Forces, 8081
process improvement, 7677
quantitative financial
information, 77
reporting and compliance
requirements, 79
stakeholder reporting, 90
strategic management
accounting, 7779
strategic plans, 9091
technology, 76
Index 191
traditional brand building, 85

transformational shift, 87
variance analysis, 80
workflow and policies, 80
financial reporting, 7374
Financial capital, 158, 173174
traditional 10-K reporting, 159

transition and evolution, 18
Intellectual capital, 155156,
171172
International Integrated Reporting
Council (IIRC), 5
Governance Metrics International

(GMI), 34
Manufactured capital, 154155,

170171
Multiple capital model (MCM), 7,
2324
business process management,
8485
financial capital, 158
human capital, 156
implementation and maintenance,
24
intellectual capital, 155156
manufactured capital, 154155
natural capital, 157158
practitioner- and market-based
research, 23
radical adjustment, 158159
relationship, 157
senior-level decision makers, 154
social capital and branding,
156157
Human capital, 156, 170171

Integrated reporting
business operations, 1617
challenges and obstacles, 8384
digitization, 83
growth opportunities, 8283
multiple capital model, 8485
smart devices, 83
strategic thinking, 84
cohesive organizational strategy, 10
corporate governance (see
Corporate governance)
data quality and accuracy, 160
deficiencies, 1920
end users benefits, 1819
evolution of, 2430
financial performance, 6
guidelines, 2123
guiding principles and concepts,
124
IIRC, 5
integrated thinking, 19
management accounting, 1011
multiple capital model, 7, 2324,
160162
new market requirements, 7
nontraditional measures, 6
organizational performance, 6
senior-level decision makers, 910
stewardship role and mindset, 17
strategic accounting function,
1112, 1718
strategic initiative, 11
substantive paradigm shifts, 17
sustainability (see Sustainability)
traditional financial reporting, 18
Natural capital, 157158, 172173

Real estate investment trust (REIT),
178
Relational capital, 156157, 169170
Sarbanes-Oxley Act, 13
Social capital, 156157, 169170
Stakeholder decision making
exploratory research, 121
information visualizing, 120
key performance questions, 119
presentation, 121
quantitative information, 120
quantitative methods, 119120
Strategic management accounting
(SMA)
managerial information, 7778
192 Index
narrow reporting and analysis

context, 79
organizational improvement, 78
quantitative metrics, 78
corporate venturing, 144
creativity, 176178
critical path, 98100
cross-functional team development,
116117
cross-functional training, 115
data and business decision making
bean growing concept, 7072
board members, 68
board performance evaluation,
6869
market performance, 68
transparency, 6970
decision-making process, 178179
financial information, 2
flexible factories, 146
human resources, 117118
implementation
accounting function, 66
data and analytics, 64
governance leadership, 6667
guidelines, 6162
information communication,
6465
information technology, 6263
internal decision-making process,
64
Key Performance Questions, 65
management accountants, 61
needs of informational users, 66
operational data integration, 65
information delivering, 148150
integrated financial reporting
business operations, 1617
cohesive organizational strategy,
10
corporate governance
(seeCorporate governance)
deficiencies, 1920
end users benefits, 1819
evolution of, 2430
financial performance, 6
guidelines, 2123
IIRC, 5
integrated thinking, 19
management accounting, 1011
multiple capital model, 7, 2324
new market requirements, 7
nontraditional measures, 6
organizational performance, 6
senior-level decision makers,
910
stewardship role and mindset, 17
strategic accounting function,
1112, 1718
strategic initiative, 11
substantive paradigm shifts, 17
sustainability (see Sustainability)
traditional financial reporting, 18
transition and evolution, 18
internal communication, 5960
IT and financial management,
110113
leadership, 59
legacy information systems, 60
metrics, 163166
models for change, 180
multiple capitals, 116117
nontraditional reporting, 2
operational aspects, 110
organizational leadership, 6061
PowerPoint presentations, 150151
predictive analytics
future results, 103
operations and financial
leadership, 103104
quality improvement, 101102
relationship building, 105106
revenue and cost drivers,
104105
strategic thinking, 103
traditional budgeting and
forecasting, 102
profession transitions, 60
reporting, 107108
stakeholder landscape
accounting and finance
functions, 4
business decision making, 34
business issue, 23
chief financial officers, 4
externalities, 5
Index 193
nontraditional stakeholders, 3
operational information, 3
stakeholder reporting
accountants, 9
financial reporting process
valuation, 89
multinational aerospace
organization, 8
post-financial crisis business
environment, 8
qualitative and quantitative
information, 9
strategic bets, 147148
strategic headset, 180181
team development, 113114
temporary organizations, 145
Sustainability
adding value, 4445
Adidas, 141143
bottom-line analysis, 41
business decision making, 141142
challenges, 15
consistency and standardization,

1415
cost/benefit ramifications, 16
environmentally oriented
initiatives, 39
legitimacy and consistency, 40
metrics, 166167
organizational decision-making
process, 4142
organizational leadership, 130
qualitative conversations, 130
reporting and assurance standards,
15
research, academia, and
practitioners partnership,
16
SASB, 14
segmenting, 41
standardization, 4244
standards and metrics, 40
Sustainability Accounting Standards
Board (SASB), 14, 43

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Strategic Management

Strategic Management Accounting: Delivering Value in a Changing Business

Key Concepts and Themes

Key Concepts and Themes

AnalyticsOften used interchangeably with big data, analytics is less

STRATEGIC MANAGEMENT ACCOUNTING

appears to be linked to the rise of nontraditional reporting, including

SMA in a Stakeholder Landscape

What Is Strategic Management Accounting? 3

STRATEGIC MANAGEMENT ACCOUNTING

What Is Strategic Management Accounting? 5

Business is much more than simply selling goods and/or services.

STRATEGIC MANAGEMENT ACCOUNTING

analyzed builds on this analysis, and proposes that integrated reporting

What Is Strategic Management Accounting? 7

and relationship capital (Jhunjhunwala 2014). Analyzed in more detail

STRATEGIC MANAGEMENT ACCOUNTING

criteria. In order to accurately evaluate and judge both the management

What Is Strategic Management Accounting? 9

factors that drive organizational performance, clearly require analysis and

Strategic Management Accounting & Integrated

STRATEGIC MANAGEMENT ACCOUNTING

Increasing digitization of the global economy has influenced virtually

What Is Strategic Management Accounting? 11

competency than a specialized niche (Krishnan 2015). Such perceptions,

STRATEGIC MANAGEMENT ACCOUNTING

What Is Strategic Management Accounting? 13

Corporate governance represents how organizations interact with

STRATEGIC MANAGEMENT ACCOUNTING

a clear, consistent, and logical manner is essential for effective business

What Is Strategic Management Accounting? 15

consistency represent two logical areas for which accounting professionals

STRATEGIC MANAGEMENT ACCOUNTING

Taking a Deep DiveIntegrated Reporting & Strategic

What Is Strategic Management Accounting? 17

organization or entity will not be able to function at optimal capacity if

STRATEGIC MANAGEMENT ACCOUNTING

What Is Strategic Management Accounting? 19

industry or management preference, the same information is compiled

STRATEGIC MANAGEMENT ACCOUNTING

accounting function to account for the increased demands placed on the

What Is Strategic Management Accounting? 21

STRATEGIC MANAGEMENT ACCOUNTING

What Is Strategic Management Accounting? 23

STRATEGIC MANAGEMENT ACCOUNTING

The Evolution of Strategic Management

What Is Strategic Management Accounting? 25

and reported by the accounting function, management accountants must

STRATEGIC MANAGEMENT ACCOUNTING

What Is Strategic Management Accounting? 27

STRATEGIC MANAGEMENT ACCOUNTING

provides accounting professionals with a vehicle to link quantitative and

What Is Strategic Management Accounting? 29

this information finalized in a shorter amount of time. Developing and

STRATEGIC MANAGEMENT ACCOUNTING

disruption and industry-wide

ranking and metrics, 34

traditional brand building, 85

traditional 10-K reporting, 159

Governance Metrics International

Manufactured capital, 154155,

Human capital, 156, 170171

Natural capital, 157158, 172173

narrow reporting and analysis