Traditions and Innovations Cost Accounting Traditions and Innovations Barfield, Raiborn, Kinney Chapter 1 Introduction to Cost and Management Accounting in a Global Business Environment

Learning Objectives (1 of 3) Explain the relationship between financial and management accounting Describe the relationships among cost, financial, and management accounting Describe the role of ethics in guiding workforce behavior Identify the factors that influence the globalization of business

Learning Objectives (2 of 3) List the primary factors and constraints that influence an organization’s strategy Explain the impact of the competitive environment on an organization’s strategy Clarify the impact of the accounting function on achievement of strategic goals and objectives

Learning Objectives (3 of 3) Explain the effect of the product life cycle on the company segment’s mission Describe the importance of the value chain

Accounting The Language of Business

Accounting Provides information to external parties Stockholders, creditors, regulators Estimates the cost of products produced and services provided Provides information to internal decision makers To plan, control, and evaluate performance

Two Types of Accounting Financial Meet external information needs Comply with GAAP Management Meet internal information needs Provide product costing information

Financial Accounting Should Provide information to stockholders, creditors, and various regulatory bodies Comply with GAAP

Management Accounting Should Provide product costing information for external financial statements Provide information useful for making decisions and controlling operations

Accounting Differences Financial External Aggregated Historical Quantitative Monetary Verifiable GAAP Managerial Internal Segmented Current/Forecasted Quantitative/Qualitative Monetary/Nonmonetary Timely/Reasonable estimate Benefits exceed costs

Relationship of Financial, Management, and Cost Accounting

Accounting Standards Financial Management Financial Accounting Standards Board (FASB) Private-sector body Management Cost Accounting Standards Board (CASB) Public-sector board

Accounting Organizations Institute of Management Accountants (IMA) Statements on Management Accounting (not legally binding) Certified Management Accountant (CMA) Certified in Financial Management (CFM) Society of Management Accountants of Canada Management Accounting Guidelines (not legally binding)

Ethics & Management Accountants Standards of Ethical Conduct for Management Accountants Competence Confidentiality Integrity Objectivity Competence Confidentiality Integrity Objectivity

Global Business Environment International trade of goods and services International movement of labor International flows of capital and information

Global Business Challenges Understand the factors influencing international business markets Devise a long-term plan to achieve organizational goals Develop information systems that keep the company’s operations consistent with its plans and goals

Global Business Environment Electronic Commerce Trade Agreements North American Free Trade Agreement (NAFTA) General Agreement on Tariffs and Trade (GATT)

North American Free Trade Agreement (NAFTA) Members agreed to allow duty-free transfer of goods under certain conditions

General Agreement on Tariffs and Trade (GATT) To provide a “level playing field” for trade among the 100+ signatory nations

Global Business Environment Risks Strategic Environment and Organization Operating Financial Information

Global Business Environment Ethical Considerations Is it legal? Does it comply with our values? How will it look in the newspaper? If you do it, will you feel bad? If it’s wrong, don’t do it. If you’re not sure, ask.

Organizational Strategy Mission Statement Goals and Objectives Strategic Planning Tactical Planning Organizational Strategy

Organizational Strategy Organizational Structure Core Competencies Organizational Constraints Organizational Culture Environmental Constraints

Organizational Strategy Organizational Structure Centralization Decentralization

Organizational Strategy Organizational Structure Core Competencies A higher proficiency than the competitors Technological innovation Engineering Product development After-sale service

Organizational Strategy Organizational Structure Core Competencies Organizational Constraints Monetary Capital Intellectual Capital Human Capital Structural Capital Relationship Capital

Organizational Strategy Organizational Structure Core Competencies Organizational Constraints Organizational Culture An organization’s norms internal and external formal and informal

Organizational Strategy Organizational Structure Core Competencies Organizational Constraints Organizational Culture Environmental Constraints Limitations on strategy caused by external differences in culture, competitive market structures, fiscal policy, laws, or political situations

Business Intelligence System Formal process for gathering and analyzing information and producing intelligence to meet decision-making needs Information about internal processes Knowledge of markets, technologies, and competitors

Levels of Intelligence Gathering Business Intelligence Competitive Intelligence Competitor Analysis Levels of Intelligence Gathering

Business Segments Segment Mission relates to Product Life Cycle Build Hold Harvest

Accounting Information Strategic Resource Management Planning for deployment of resources to create value for customers and shareholders Value Chain—Foundation of SRM Set of processes that convert inputs into products and services Use accounting information to evaluate the value chain to improve strategic resource management

The Accountant’s Role Accountants provide information that is used to make strategic decisions measure and evaluate management provide appropriate incentives provide information about the value chain

Questions What is the relationship among cost, financial, and management accounting? How do ethics guide workforce behavior? What is the impact of the accounting function on achievement of strategic goals and objectives?