Management Accounting in Transitional Economies By: Olga Girinova Olga Kuznecova Oleg Leonov Elena Safonova 2007

Main factors of transitional economies  Growth of privatization  Deregulation of economy  International business impact  Global competition  New information and production technology

Impacts on management accounting development 1.Changes in the business environment  Competition  Changes in the form of business ownership  Foreign Direct Investment flow  Financial market development  Globalization

Impacts on management accounting development 2.Changes of internal business changes:  managerial practices  production structure  organizational structure  demand for more detailed divisional information  development and implementation of new information processing and transmission technologies  benchmarking in the cost and management accounting

Impacts on management accounting development 3.Accounting environment  Changing in the accounting legislation and new laws introduction  Harmonization process  Management accounting knowledge transfer

Impacts on management accounting development 4.Culture

Central & Eastern Europe Economic situation influencing management accounting development:  centrally-planned market background;  loss of some market (particularly in former Soviet Union);  a sharp rise in the interest rates;  multiple increase in prices for energy;

Central & Eastern Europe Previous system “legacy” for management accounting:  Full costing techniques;  long-term planning;  operational management accounting;  Need for IT support;

Central & Eastern Europe Negative aspects: 1.Using financial accounting for decision making 2.Lack of possibility to use the information from budgets 3.performance measurement based on the products and function is not efficient 4.absence of special management accounting branch

Central & Eastern Europe Needs for improvement the countries faced:  management accounting department;  new techniques implementation;  relevant IT support;  experience in new condition;

Management Accounting in Russia Still remains to be cost accounting rather than management Strong dominance of tax accounting Cost leadership Lack of professional training and knowledge Inadequacy of the Financial Accounting standards impedes management accounting development

Management Accounting in Russia Difficult to search for management accountants within organizational structure Gap in coordination within an organization MAS are mostly seen as cost accounting systems

Management Accounting practices in China  Socialistic period - the government controlled prices and investment decisions  Relatively limited use of budgets  Standard costing techniques appreciation  Cost Volume Profit analysis (CVP) link target profit with operational planning  Increase in scope of application of responsibility accounting  Low level of application of strategic management techniques - ABC, BSC etc.  Inability of a system based on production to adapt to one based on price

Difficulties for Management Accounting in the emerging countries:  Market economy transition problems  Developing economy – lack of investment into the information technology  Lack of knowledge  importing western theory with low adjustment to the local conditions

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