RECENT DEVELOPMENTS IN MANAGEMENT ACCOUNTING

1

Lecture outline: • Management accounting scope • The evolution of management accounting • Management accounting change • The gap between theory and practice BKAM 3033 – Topic 1 2 .

Management Accounting Scope Provision of information Manage resources efficiently • Decision making • Control • Planning • Direction setting • Change •Commitment BKAM 3033 – Topic 1 3 .

BKAM 3033 – Topic 1 Evolution of the Focus of MA Stage 4 Ongoing Transformation Transformation Transformation Transformation Source: IFAC. 1998 Stage 1 Stage 2 Stage 3 Stage 4 Focus 4 3 2 1 .

Management Accounting Change Stage 1 Stage 2 Stage 3 Stage 4 •Cost determination •Financial control •Management planning and control •Reduction of waste •Value creation BKAM 3033 – Topic 1 5 .

Change in the Profession Scorekeepers Bean counters Change Change Internal consultant -business partner -business analyst BKAM 3033 – Topic 1 6 .

Change in the Profession “Accounting is changing. our prices. and the markets in which we business. People have a sense of purpose. just crunching the numbers.” (Abbott Laboratories) “We are looked upon as more business advisors than just accountants. You are actually getting to be part of the day-to-day functions of the business. You are no longer sitting behind a desk just working on a computer. We spend more of our time analysing and understanding our margins. which has a lot to do with the additional analysis and forward-looking goals that we are setting.” (Caterpillar. Inc) BKAM 3033 – Topic 1 7 . have a sense of “I am adding value to the company.

Lin BKAM 3033 – Topic 1 8 .Change in Profession The Prior Business Environment Financial The Contemporary Business Environment View cost Common emphasis on standardisation & Std cost The accountants as functional expert and financial scorekeeper reporting and of cost acctg as a tool for the development and implementation of business strategy The accountant as a business partner Blocher. Chen.

Change in Profession • Today’s management accountants need the following skills: – Solid knowledge of both financial and management accounting – Analytical skills – Knowledge of how a business functions – Ability to work on a team – Oral and written communication skills BKAM 3033 – Topic 1 9 .

WHAT FACTORS DRIVE CHANGE OF MA External •Customer oriented (competition) •Technology •Globalization Customer-oriented (competition) Internal Organizational BKAM 3033 – Topic 1 10 .

WHAT FACTORS DRIVE CHANGE OF MA External Focus on customer satisfaction BKAM 3033 – Topic 1 11 .

WHAT FACTORS DRIVE CHANGE OF MA .Internal • Core competencies and work characteristics of the organisation – Modern production technologies  changes in product costing practices – IT  capital budgeting – E-commerce  new ways of operating • Design of MA systems – Style of management – Existence of TQM programmes BKAM 3033 – Topic 1 12 .

WHAT FACTORS DRIVE CHANGE OF MA Organizational • Merger and acquisition • Organizational restructuring • Corporate failures  enhanced corporate governance BKAM 3033 – Topic 1 13 .

2008):  Macro refers to concepts and techniques  Micro refers to the behavioural patterns of use.The Gap between Theory and Practices • Management accounting practices can be observed at the macro or micro levels (Drury. Tendency towards globalization at the macro level. • BKAM 3033 – Topic 1 14 .

BKAM 3033 – Topic 1 15 . ERP systems)  Standardization by transnational companies  Global consultancy  Use of global textbooks • At the micro level accounting information may be used in different ways due to influence of different national and local cultures.The Gap between Theory and Practices • Drivers of convergence include:  Global competition  Information technology (e.g.

• For example. CIMA stated its first objective as “to promote and develop the science of management accountancy”. BKAM 3033 – Topic 1 16 . • CIMA established the Technical Committee to oversee a rigorous technical development agenda.The Gap between Theory and Practices • Professional bodies play an important role to bridge the gap between MA theory and practice. – Review developing practices and highlight what’s working and what’s not.

BKAM 3033 – Topic 1 17 . • In Malaysia. NAfMA awards is introduced by CIMA and MIA to promote best practices of MA.The Gap between Theory and Practices • CIMA also worked with IFAC to develop the concept of enterprise governance. focusing on the balance between regulatory conformance and business performance. • The NAfMA awards recognize the best practices in MA that lead to value creation and excellent business performance based on the MA concepts of IFAC.

BKAM 3033 – Topic 1 18 . • The awards also reflects the shift from ‘number cruncher’ and ‘corporate cop’ to decision-support specialists and reflects what it takes to compete in today’s lean.The Gap between Theory and Practices • NAfMA award is a response to the criticism by accounting practitioners and educators on the ground that MA practices had changed little over for almost 60 years (e. despite radical changes in the business environment.1987). technologically-driven environment.g Johnson & Kaplan. global.