1 st Session Strategic Management Accounting
Management Accounting: Rise By 1925, virtually all management accounting practices used today had been developed Cost accounts for labour, material, and overheads Budgets for cash, income Flexible budgets Standard Costs and Variance Analysis Transfer Pricing Divisional Performance
Management Accounting: Rise Most important management accounting innovation was the Return on Investment (ROI) measure. F. Donaldson Brown, the chief financial officer of Du Pont decomposed ROI into its components and demonstrated that the measure can be viewed as a combination of two of the efficiency measures – operating ratio (return to sales) and stock-turnover (sales to assets).
Management Accounting: Fall Changing Business Scenario: From stockholders’ to Stakeholders Lack of Support from Information Technology The Phenomena of Border less World Management thinking: Paradigm shifts Lack of clarity among the professionals
Management Accounting: Fall Dominance of Statutory accounting With more widespread public ownership of corporations, Periodic crises in capital markets Increased shareholders’ activism Increased role of Regulators Lack of synergy with other profession
Management Accounting to Strategic Management Accounting.Realisation of the industry – Internal accounting –Responsibility Accounting Cut throat competition: Increasing role of market Development in the literature : SCM/ EVA/BSC Development in the Information Technology
Critical Chain By Eliyahu M.Goldratt A prelude to the Course
Problem Two years of product development (Production) 6 months of product life cycle (Marketing) Very volatile stock market Stiff competition
Suggestions Back-ward integration Technology improvement Spin-off the activity Outsource Explore new markets (Extend the operation) Change financial evaluation indicators Reduce the process time
Class-Plan Responsibility Accounting Strategic Cost Management Financial Measures of Divisional Performance Transfer Pricing Financial Measures of Total Business Unit