Chapter 01 Atkinson, Kaplan, Matsumura & Young Management Accounting 6th ed Powerpoint

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HowHow Management AManagement AccountingccountingHowHow Management AManagement Accountingccounting
Information SupportsInformation SupportsInformation SupportsInformation Supports
ecision Ma!ingecision Ma!ingecision Ma!ingecision Ma!ing
Chapter 1Chapter 1

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Management AccountingManagement Accounting
InformationInformation

The Institute of Management Accountants has
defined management accounting as:
– A profession that involves partnering in
management decision making, devising planning
and performance systems, and providing expertise
in financial reporting and control to assist
management in the formulation and
implementation of an organiation!s strategy

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Management AccountingManagement Accounting
InformationInformation

Management accounting provides relevant
information to managers and employees
– "oth financial and nonfinancial information
– #seful for making decisions, allocating resources,
and monitoring, evaluating, and re$arding
performance
– Customied to serve multiple purposes

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Management AccountingManagement Accounting
InformationInformation

%xamples of management accounting information
include:
– The reported expense of an operating department
– The cost of producing a product
– The cost of delivering a service
– The cost of performing an activity or &usiness
process
– The cost of serving a customer

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"inancial vs. Management"inancial vs. Management
Accounting Accounting
'inancial Accounting

(etrospective

)rimarily orientated to
external stakeholders,
such as investors,
creditors, regulators, and
tax authorities

*tresses the form in $hich
it is communicated
Management Accounting

"oth retrospective and
prospective

)rimarily orientated to
needs of employees and
managers

+o prescri&ed form or
rules a&out its content

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#hanging "ocus#hanging "ocus

%arly 1th century – systems to measure the cost of
producing individual products

Middle of the 1th century
– (ailroads first to develop and use financial
statistics to assess and monitor performance
– Andre$ Carnegie developed detailed cost systems
that gave him a competitive advantage

%arly -.th century – /u)ont and 0eneral Motors
expanded the focus to planning and control

1.!s – 2apanese manufacturers developed ne$
tools to report on 3uality, service, customer, and
employee performance

7. Strateg$Strateg$

Management accounting is a discipline that helps
an enterprise to develop and implement its
strategy

*trategy is a&out an organiation making choices
a&out $hat it $ill do or not do

As a strategy gets executed, management
accounting information provides feed&ack
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Plan%o%#hec!%Act #$clePlan%o%#hec!%Act #$cle
or eming #$cleor eming #$cle

/eveloped &y 3uality expert, 45 %d$ards /eming

A systematic and recursive $ay to develop,
implement, monitor, evaluate, and change a course
of action

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P#A StepsP#A Steps

)lan *tep defines the organiation!s purpose and
selects the focus and scope of its strategy

/o *tep involves the implementation of a chosen
course of action

Check *tep includes measuring and monitoring
performance and taking short6term actions &ased
on measured performance

Action *tep involves managers taking actions to
lo$er costs, change resource allocations, and
improve 3uality

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&ehavioral Implications&ehavioral Implications

As measurements are made on operations and
especially on individuals and groups their &ehavior
changes
– )eople react $hen they are &eing measured, and they
react to the measurements
– They focus on the varia&les and &ehavior &eing
measured and spend less attention on those not
measured

T$o old sayings recognie these phenomena:
– 74hat gets measured gets done58
– 7If you don!t measure it, you can!t manage and
improve it58

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&ehavioral Implications&ehavioral Implications

%mployees familiar $ith the current system may
resist as managers attempt to introduce or redesign
cost and performance measurement systems

%mployees have ac3uired expertise in the use of
the old system

%mployees also may feel committed to the
decisions &ased on the information the old system
produced

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&ehavioral Implications&ehavioral Implications

Management accountants must understand and
anticipate the reactions of individuals to
information and measurements

4hen the measurements are used not only for
information, planning, and decision6making, &ut
also for control, evaluation, and re$ard,
employees and managers place great pressure on
the measurements themselves

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&ehavioral Implications&ehavioral Implications

Managers and employees may take unexpected
and undesira&le actions to influence their score on
the performance measure

Managers seeking to improve current &onuses
&ased on reported profits may skip discretionary
expenditures that may improve performance in
future periods

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