Managerial Accounting 2008 William F. O’Brien, MBA, CPA

MANAGERIAL ACCOUNTING Some Preliminary Thoughts n Course website: lsb.scu.edu/~wobrien n Text website: n Focus of this textbook n Strategic focus n Users perspective

Session I Introduction to Managerial Accounting

MANAGERIAL ACCOUNTING Session I Objectives n Why focus on managerial accounting n The managerial accounting cycle n Managerial versus financial accounting n Organizational and structural issues n Key players & “The What” and “The How” n Process versus functional focus n Technology impact on managerial accounting n The role of ethics, governance and risk

MANAGERIAL ACCOUNTING Why Focus on Managerial Accounting? n Globalization…timely flow of information n Strategic success…timely flow of information n Risk & governance…timely flow of information n Bottom line: your accounting systems impact the timing and quality of your information!

MANAGERIAL ACCOUNTING Financial Management Evolution DATAINFORMATIONANALYSIS IMPLEMENTATION Today’s Corporate Focus is on Results! The bottom line: business factors drive accounting development.

MANAGERIAL ACCOUNTING Plan Managerial Accounting Model Monitor ImplementAdjust Accounting Information Communication Environment

MANAGERIAL ACCOUNTING Managerial vs. Financial Actg n internal vs. external n prospective vs. historical n non-financial vs. financial n non-GAAP vs. GAAP n not required vs. required n timely vs. precise n segments vs. whole n relevant & flexible vs. objective & verifiable

MANAGERIAL ACCOUNTING Organizational Issues n Structure n Key players n The What n The How

MANAGERIAL ACCOUNTING Structure n Solid line n Challenges and benefits n Dotted line n Challenges and benefits n Matrix n Challenges and benefits

MANAGERIAL ACCOUNTING Key Players n Chief financial officer or CFO n Chief accounting officer or CAO n Often the controller n Vice president of finance n Director of finance n Only financial officer or OFO

MANAGERIAL ACCOUNTING Accounting Business Skills “The What” n Business Perspective n Organizational Focus n Bias for Action n Communication Excellence n People Proficiency

MANAGERIAL ACCOUNTING Financial Management Guidelines “The How” n Cc: Communication versus control n KTT: Knowing the territory n MBWA: Managing by wandering around n R ƒ R 3 : Respect is a function of… n responsiveness n reliability n relevance

MANAGERIAL ACCOUNTING Process versus Functional Focus n Lean thinking (exh. 1-6) n Avoid waste n Inventory pull n Theory of constraints (exh. 1-7) n Eliminating botttenecks n Goldratt’s: The Goal (Jun. 2 nd ) n Value chain analysis n Michael Porter’s approach n Value processes

MANAGERIAL ACCOUNTING Process versus Functional Focus, continued n Six Sigma analysis n Motorola driven n DMAIC n Employee reaction n Make it real

MANAGERIAL ACCOUNTING Technology Impact n Internet aspects n Enterprise-wide thinking

MANAGERIAL ACCOUNTING Ethical Implications n You have only one reputation n Direct and indirect costs of fraud n $700 billion lost in U.S. revenue due to fraud n Not limited to the U.S.—i.e. Parmalat n WorldCom story n Do you have what it takes? n Codes of conduct n Readable and realistic

MANAGERIAL ACCOUNTING Governance and Risk n Tone at the top n Sarbanes-Oxley Act of 2002 n Reactionary n Major provisions n Public Company Accounting Oversight Board n CEO/CFO sign off n Assessment of reporting controls n Is it working n Shifting focus to overall business risk n Enterprise risk managerment n Identification of the risks is step #1 (exh. 1-11)

MANAGERIAL ACCOUNTING Key Points-Session I n Managerial accounting is a critical component of the firm’s success n Managerial and financial accounting are not the same n Accounting systems and financial perspective are critical n Process is more important than function n Ethics is critical n Governance starts at the top n The entire enterprise must be considered