TOPIC NINE: EMERGING TRENDS AND ISSUES IN MANAGEMENT
ACCOUNTING
Emerging trends and issues in Management
Accounting
Discuss emerging • Emerging trends and issues in management Class Assignments
trends and issues accounting
Question & Answer
in management • Challenges and opportunities posed by the
emerging Demonstrations
Trends and issues in management accounting
Group discussions
accounting
• Approaches of coping with opportunities and
managing challenges posed by the emerging
issue and trends in management accounting
Emerging trends and issues in management accounting
The following are issues that emerge in management accounting.
i) Expansion from product to channel and customer profitability analysis
I would like to believe that the reporting of more accurate product and standard service-line
cost and profitability information using Activity-based costing (ABC) traces expenses into cost
with resource and activity drivers and provides much cost visibility that is traditionally hidden.
Sadly, many organizations continue to use a single indirect and shared expense “pool” that
allocates resource expenses into costs based on a single cost factor, which violates cost
accounting’s causality principle. The result is products and service-lines are simultaneously
over- and under-costing because allocations always have a zero-sum error. It’s baffling how
accountants can accept this deficient practice when ABC is a better alternative.
, ii) Management accounting’s expanding role with enterprise performance
management (EPM)
Enterprise performance management (EPM) can be defined as the integration of multiple
methods (such as strategy maps, balanced scorecard, performance measures, driver-based
budgeting, lean management, and customer relationship management) to achieve the executive
team’s strategy, improve control, and increase financial profits – all through making better
decisions. The output of a management accounting system is always the input to use in gaining
insights and managing activities and operations.
iii) The shift to predictive accounting
A gap is widening between what management accountants report and what managers and
employee teams want. The gap is being caused by a shift in managers’ needs – from needing
to know what things cost (such as a product cost) and what happened to a greater need for
detailed information about what their future costs will be and why. The past reflects decisions
already made. Decisions that will be made are the ones that impact the future.
iv) Business analytics imbedded in EPM methods
Business analytics and Big Data are hot topics. They are here to stay because complexity,
uncertainty, and volatility are on the rise. Today the need for analytics may be the only
sustainable long-term competitive advantage. This is because the traditional generic strategies,
like being the lowest cost supplier or product or customer differentiation, are vulnerable to
agile competitors who can quickly match a supplier’s price or invade your customer base.
v) Co-existing and improved management accounting methods
There are debates in the management accounting community about what is the most appropriate
costing method. There can be rival camps such as lean accounting and activity-based costing
(ABC) advocates. The solution is accept having two or more co-existing management
accounting methods. There can be different costs for different purposes used by different types
of managers and employee teams.
, vi) Managing Information Technology and Shared Services as a Business
It is human nature that when something is free one doesn’t care how much one consumes
whatever the item or service may be. There is a trend toward using management accounting for
internal chargebacks (like an invoice) from internal service providers to service users. Line-
item IT charge back invoices create a service provider a market for pricing. This information
also serves for establishing what are effectively “transfer prices” based on cost consumption
rates for service level agreements (SLAs).
vii) The need for better skills and competency with behavioral cost management
An evolving trend is that activist management accountants, those who are promoting
progressive methods as described in the trends already mentioned, are encountering obstacles
to get buy-in and acceptance of their ideas. They are realizing they need to improve their
behavioral change management skills and capabilities.
Emerging trends and issues in management accounting
i) The Balanced Scorecard Approach
ii) Kaizen Costing
iii) Target costing
iv) Lifecycle Costing
v) Benchmarking Cost Accounting
vi) Activity-Based Costing (ABC)
vii) Strategic Cost Management
viii) Theory of Constraints
ix) Human resource accounting
x) Just-In-Time Systems
1. The Balanced Scorecard Approach
The Balanced Scorecard is a strategic planning and management system used to align business
activities to the vision and strategy of the organization by monitoring performance against
strategic goals.
ACCOUNTING
Emerging trends and issues in Management
Accounting
Discuss emerging • Emerging trends and issues in management Class Assignments
trends and issues accounting
Question & Answer
in management • Challenges and opportunities posed by the
emerging Demonstrations
Trends and issues in management accounting
Group discussions
accounting
• Approaches of coping with opportunities and
managing challenges posed by the emerging
issue and trends in management accounting
Emerging trends and issues in management accounting
The following are issues that emerge in management accounting.
i) Expansion from product to channel and customer profitability analysis
I would like to believe that the reporting of more accurate product and standard service-line
cost and profitability information using Activity-based costing (ABC) traces expenses into cost
with resource and activity drivers and provides much cost visibility that is traditionally hidden.
Sadly, many organizations continue to use a single indirect and shared expense “pool” that
allocates resource expenses into costs based on a single cost factor, which violates cost
accounting’s causality principle. The result is products and service-lines are simultaneously
over- and under-costing because allocations always have a zero-sum error. It’s baffling how
accountants can accept this deficient practice when ABC is a better alternative.
, ii) Management accounting’s expanding role with enterprise performance
management (EPM)
Enterprise performance management (EPM) can be defined as the integration of multiple
methods (such as strategy maps, balanced scorecard, performance measures, driver-based
budgeting, lean management, and customer relationship management) to achieve the executive
team’s strategy, improve control, and increase financial profits – all through making better
decisions. The output of a management accounting system is always the input to use in gaining
insights and managing activities and operations.
iii) The shift to predictive accounting
A gap is widening between what management accountants report and what managers and
employee teams want. The gap is being caused by a shift in managers’ needs – from needing
to know what things cost (such as a product cost) and what happened to a greater need for
detailed information about what their future costs will be and why. The past reflects decisions
already made. Decisions that will be made are the ones that impact the future.
iv) Business analytics imbedded in EPM methods
Business analytics and Big Data are hot topics. They are here to stay because complexity,
uncertainty, and volatility are on the rise. Today the need for analytics may be the only
sustainable long-term competitive advantage. This is because the traditional generic strategies,
like being the lowest cost supplier or product or customer differentiation, are vulnerable to
agile competitors who can quickly match a supplier’s price or invade your customer base.
v) Co-existing and improved management accounting methods
There are debates in the management accounting community about what is the most appropriate
costing method. There can be rival camps such as lean accounting and activity-based costing
(ABC) advocates. The solution is accept having two or more co-existing management
accounting methods. There can be different costs for different purposes used by different types
of managers and employee teams.
, vi) Managing Information Technology and Shared Services as a Business
It is human nature that when something is free one doesn’t care how much one consumes
whatever the item or service may be. There is a trend toward using management accounting for
internal chargebacks (like an invoice) from internal service providers to service users. Line-
item IT charge back invoices create a service provider a market for pricing. This information
also serves for establishing what are effectively “transfer prices” based on cost consumption
rates for service level agreements (SLAs).
vii) The need for better skills and competency with behavioral cost management
An evolving trend is that activist management accountants, those who are promoting
progressive methods as described in the trends already mentioned, are encountering obstacles
to get buy-in and acceptance of their ideas. They are realizing they need to improve their
behavioral change management skills and capabilities.
Emerging trends and issues in management accounting
i) The Balanced Scorecard Approach
ii) Kaizen Costing
iii) Target costing
iv) Lifecycle Costing
v) Benchmarking Cost Accounting
vi) Activity-Based Costing (ABC)
vii) Strategic Cost Management
viii) Theory of Constraints
ix) Human resource accounting
x) Just-In-Time Systems
1. The Balanced Scorecard Approach
The Balanced Scorecard is a strategic planning and management system used to align business
activities to the vision and strategy of the organization by monitoring performance against
strategic goals.
