CPA AUSTRALIA STUDY SUPPORT – STRATEGIC MANAGEMENT ACCOUNTING
CPA AUSTRALIA STUDY SUPPORT – STRATEGIC MANAGEMENT
ACCOUNTING (S2 – 2022)
Table of content
Module 1: Introduction to strategic management accounting ................................. 2
Part A: Value..............................................................................................................3
Part B: The strategic management process ................................................................4
Part C: The role of management accountants in strategic management ....................7
Part D: The key challenges facing management accountants ..................................11
Part E: Analytical techniques available to management accountants ......................23
Module 2 Information for decision-making ............................................................ 35
Part A: Types of information needed for stakeholder decision-making ..................35
Part B: Information, information systems and their effect on organisational
decision-making and performance ...........................................................................39
Part C: The role of management accountants in influencing stakeholder decision-
making......................................................................................................................51
Part D: Upgrading or replacing information systems ..............................................60
Module 3: Planning, budgeting and forecasting ..................................................... 71
Part A: Introduction to plans, budgets and forecasts ...............................................71
Part B: Developing master budgets..........................................................................77
Part C: Variance analyses and control .....................................................................87
Part D: Behavioural aspects of budgets ...................................................................94
Part E: Alternative approaches to budgeting ...........................................................97
Module 4 Project Management............................................................................... 107
Part A: Project management defined what is a project? ........................................107
Part B: Roles in project management.....................................................................111
Part C: The management accountant’s role in project selection ............................116
Part D: The management accountant’s role in project planning ............................132
Part E: The management accountant’s role in project implementation and control
................................................................................................................................137
Part F: The management accountant’s role in project completion and review ......144
Module 5 Performance Management ..................................................................... 150
Part A: The role of performance management .......................................................150
Part B: Strategy, management control and performance management ..................166
Part C: Determining performance measures and setting performance targets .......189
Module 6 Tools For Creating And Managing Value ............................................ 207
1
, CPA AUSTRALIA STUDY SUPPORT – STRATEGIC MANAGEMENT ACCOUNTING
Part A: The value chain..........................................................................................207
Part B: Strategic product costing ...........................................................................207
Part C: Strategic revenue management ..................................................................210
Part D: Strategic cost management ........................................................................213
Part E: Strategic profit management— upstream activities ...................................227
Part F: Strategic profit management— downstream activities ..............................238
Module 1: Introduction to strategic management accounting
Preview
Introduction
SMA is defined as creating sustainable value by:
+ Supporting the formation, selection, implementation and evaluation of organizational
strategy
+ Synthesizing information that captures financial and non-financial perspectives for
both the internal and external environments, to enable effective resource allocation.
Entities are like ‘linked chains’ of resources and activities that produce products and
services of value to consumers and end users.
Essential requirements for successful performance:
1. generate products and services with value that consumers are willing to pay for.
2. constantly develop and improve the resources, activities and processes used to
generate that value.
For value creation = a clear strategy, based on a vision and mission that combine
resources (including people, technology and time) + effective use information flow
from the strategic level to the operational level and feedback and reporting come back
from the operational level.
The organization must also be aware of the external environment in which it operates.
Like competitor activity and the broader economic and regulatory environment, etc, so
2
, CPA AUSTRALIA STUDY SUPPORT – STRATEGIC MANAGEMENT ACCOUNTING
that organization can adapting to change.
The management accountant is at the centre of all these activities.
Part A: Value
Value influences an organisation’s behaviour and drive org to achieve its vision,
mission and goals. It combines resources in a manner that creates desirable outcomes.
The role of management accountants is to support management in creating, managing
and protecting value.
There are a range of stakeholders, shareholder, employees, customers, suppliers,
regulators, lenders and community groups. Each group has its own interests and desires
and therefore its own definition of the ‘value’ it wishes to receive from an organisation.
Value creation in contemporary organisations is based on creativity and innovation.
Including new materials, technologies and processes, as compared to value creation in
the past, which was based on economies of scale and mass production.
Shareholder value
The ultimate outcome for many organisations is to generate wealth for the owners.
However, to ensure that an organisation can create shareholder value over a prolonged
period, its actions and use of resources need to be sustainable.
Customer value
The primary task for an organisation is to create an output that has customer value at a
cost that is lower than the price the customer is willing to pay, which leads to
profitability and creates shareholder value.
Figure 1.3 shows a simple version of the organisational value chain. This provides an
overview of how the organisation performs a sequence of activities to provide outputs
or outcomes to create customer value.
Figure 1.3: Organisational value chain
3
CPA AUSTRALIA STUDY SUPPORT – STRATEGIC MANAGEMENT
ACCOUNTING (S2 – 2022)
Table of content
Module 1: Introduction to strategic management accounting ................................. 2
Part A: Value..............................................................................................................3
Part B: The strategic management process ................................................................4
Part C: The role of management accountants in strategic management ....................7
Part D: The key challenges facing management accountants ..................................11
Part E: Analytical techniques available to management accountants ......................23
Module 2 Information for decision-making ............................................................ 35
Part A: Types of information needed for stakeholder decision-making ..................35
Part B: Information, information systems and their effect on organisational
decision-making and performance ...........................................................................39
Part C: The role of management accountants in influencing stakeholder decision-
making......................................................................................................................51
Part D: Upgrading or replacing information systems ..............................................60
Module 3: Planning, budgeting and forecasting ..................................................... 71
Part A: Introduction to plans, budgets and forecasts ...............................................71
Part B: Developing master budgets..........................................................................77
Part C: Variance analyses and control .....................................................................87
Part D: Behavioural aspects of budgets ...................................................................94
Part E: Alternative approaches to budgeting ...........................................................97
Module 4 Project Management............................................................................... 107
Part A: Project management defined what is a project? ........................................107
Part B: Roles in project management.....................................................................111
Part C: The management accountant’s role in project selection ............................116
Part D: The management accountant’s role in project planning ............................132
Part E: The management accountant’s role in project implementation and control
................................................................................................................................137
Part F: The management accountant’s role in project completion and review ......144
Module 5 Performance Management ..................................................................... 150
Part A: The role of performance management .......................................................150
Part B: Strategy, management control and performance management ..................166
Part C: Determining performance measures and setting performance targets .......189
Module 6 Tools For Creating And Managing Value ............................................ 207
1
, CPA AUSTRALIA STUDY SUPPORT – STRATEGIC MANAGEMENT ACCOUNTING
Part A: The value chain..........................................................................................207
Part B: Strategic product costing ...........................................................................207
Part C: Strategic revenue management ..................................................................210
Part D: Strategic cost management ........................................................................213
Part E: Strategic profit management— upstream activities ...................................227
Part F: Strategic profit management— downstream activities ..............................238
Module 1: Introduction to strategic management accounting
Preview
Introduction
SMA is defined as creating sustainable value by:
+ Supporting the formation, selection, implementation and evaluation of organizational
strategy
+ Synthesizing information that captures financial and non-financial perspectives for
both the internal and external environments, to enable effective resource allocation.
Entities are like ‘linked chains’ of resources and activities that produce products and
services of value to consumers and end users.
Essential requirements for successful performance:
1. generate products and services with value that consumers are willing to pay for.
2. constantly develop and improve the resources, activities and processes used to
generate that value.
For value creation = a clear strategy, based on a vision and mission that combine
resources (including people, technology and time) + effective use information flow
from the strategic level to the operational level and feedback and reporting come back
from the operational level.
The organization must also be aware of the external environment in which it operates.
Like competitor activity and the broader economic and regulatory environment, etc, so
2
, CPA AUSTRALIA STUDY SUPPORT – STRATEGIC MANAGEMENT ACCOUNTING
that organization can adapting to change.
The management accountant is at the centre of all these activities.
Part A: Value
Value influences an organisation’s behaviour and drive org to achieve its vision,
mission and goals. It combines resources in a manner that creates desirable outcomes.
The role of management accountants is to support management in creating, managing
and protecting value.
There are a range of stakeholders, shareholder, employees, customers, suppliers,
regulators, lenders and community groups. Each group has its own interests and desires
and therefore its own definition of the ‘value’ it wishes to receive from an organisation.
Value creation in contemporary organisations is based on creativity and innovation.
Including new materials, technologies and processes, as compared to value creation in
the past, which was based on economies of scale and mass production.
Shareholder value
The ultimate outcome for many organisations is to generate wealth for the owners.
However, to ensure that an organisation can create shareholder value over a prolonged
period, its actions and use of resources need to be sustainable.
Customer value
The primary task for an organisation is to create an output that has customer value at a
cost that is lower than the price the customer is willing to pay, which leads to
profitability and creates shareholder value.
Figure 1.3 shows a simple version of the organisational value chain. This provides an
overview of how the organisation performs a sequence of activities to provide outputs
or outcomes to create customer value.
Figure 1.3: Organisational value chain
3
