Page Module Key Term/ Concept Definition/Description Other Comments
MODULE 1 INTRO TO SMA
3 1 Strategic Creating sustainable value, supporting strategy, synthesising
management information
accounting
3 1A Value Value is a broad concept. It can be described as combining resources
together in a manner that creates desirable outcomes.
3 1A Value creation Generate products people will pay and develop/improve resources,
activities and processes
3 1A Customer value Customer value: create an output that has customer value (need to
produce at a price lower than the price the customer is willing to pay,
which leads to profitability)
3 1A Stakeholder value Stakeholder value: a by-product of generating value in other areas.
- To create products or services, an organisation will require
community permission to operate, infrastructure, customers and
employees—who will only supply their e ort if the wages and
conditions are adequate. That is, the organisation must provide
suitable value to its stakeholders.
3 1A Types of value for Stakeholders vs Value to the stakeholder 4. Suppliers - Contracts that generate su icient revenue for
stakeholders 1. Owners - Financial returns, employment / career opportunities (if the costs involved, strong and reliable working relationships
also employees) 5. Employees - Appropriate reward for the e ort contributed
2. Lenders - Receive a return (interest) for the amount loaned to the to the company (both monetary and qualitative items, such
company (would destroy value if the company did not have su icient as recognition and job satisfaction)
funds to repay) 6. Community Groups - Products safe to use, sustainable raw
3. Customers - Products that comply with safety, environmental materials, recycled at end of use
standards etc, reasonable price, warranty
4 1A Value viewpoint Need to consider society's viewpoint as well as organisational.
4 1A Organisational Organisational viewpoint of value Society’s viewpoint of value
viewpoint vs 1. Cost cutting - reducing the number of sta by 10% to increase 1. Unemployment, financial pressure on communities and
Society Viewpoint profitability additional stress for employees who remain employed
2. Switching production to cheaper o shore locations with lower 2. Local unemployment, environmental degradation, and an
standards of employee and environmental protections increase in injuries and incidents among employees who
3. Massive price discounting of key items by supermarkets to gain receive little protection
market share, forcing suppliers to reduce prices 3. A small price reduction for individual consumers but at the
4. Selling additive products or services including gambling, alcohol expense of producers who are unable to remain viable
and cigarettes 4. Social issues in communities and an increase in health-
related costs
5 1A Strategic - Strategic management accounting is aimed specifically at improving Strategic management accounting aims to provide forward-
management organisational outcomes. looking information (not only focusing on internal accounting
accounting -Strategic management describes the process by which an information but also external information) to assist
organisation decides: management in decision-making.
• the direction it will take
• the industry it will operate within
• the types of products or services it will provide
• its structure, systems and processes
• its goals and objectives.
5 1A Evolution of Creating sustainable value by:
management • supporting the formation, selection, implementation and evaluation of organisational strategy; and
accounting to a • providing information that captures financial and non-financial perspectives for both the internal and external environments to enable
strategically e ective resource allocation.
focused role
6 1B Strategic Defines the organisation’s strategy and making choice process, evaluates the business and contemporary environment, and defines its
Management objectives and strategy.
Process
6 1B Strategic - Strategic management, which focuses on determining the direction - Operational management, which can be considered as the
management v and structure of the organisation and developing plans and objectives implementation phase of strategic management—turning the
Operational for achieving this; and strategy into reality.
management
6 1B Strategic The strategic management process involves:
management • addressing key issues, including determining the vision, mission and purpose of an organisation
• setting specific objectives
• creating and implementing the strategies to achieve these objectives
6 1B Strategic Management Process
1
,6 1B 1. Strategic - Scanning the internal and external organisational environment - Organisations must also analyse their own resources and
Analysis - Organisations must continuously analyse the external environment capabilities to understand how they might react to
to understand trends and changes that a ect the industry and the changes in the environment.
economy.
6 1B 2. Strategy - Strategy formulation is the next step in the strategic management
planning & Choice process.
- This includes developing specific strategies, actions and measures.
6 1B 3. Strategy Entails crafting an e ective organisational structure, organisational
implementation processes and culture
6 1B 4. Strategy - This involves measuring performance, providing feedback and
evaluation undertaking continuous review for improvement.
7 1B Operational - Senior managers focus on strategic tasks.
management (for - Operational managers focus on the medium- to short-term tasks.
middle managers)
8 1B Di erence btw Strategic management: Operational management
strategic & - Directly linked to survival of an organisation - Not directly related, but indirectly influences organisational
operational - Organisation-wide phenomenon survival
management - Long-term process - Relates to specific operations of the organisation
- Involves non-routine activities - Focused on short and medium terms
- Sometimes very ambiguous - Involves routine day-to-day activities
- Requires high-level strategic management orientation - Does not involve any ambiguity
- Manages critical success factors (CSFs) of the organisation - Requires tactical management orientation and focus on
doing, implementing and achieving operational excellence
- Performs activities on a day-to-day basis
9 1B Strategic - Flatter hierarchies have resulted in greater authority and decision
management making power delegated to lower level employees.
accounting and - MAs are required to provide support and training to line managers to
line managers enable them to prepare and communicate key performance
information to MA for analysing.
10 1B Strategic - A service is intangible, so it can be more di icult to define or - The same approaches and tools are used to analyse
management measure systematically. services, but the main characteristics of services can make
accounting and - Once a service is provided, it cannot be consumed or used again in this analysis more di icult.
service industries the same way as a product. This means there is no ability to store a - The important issues in a service environment include the
service as inventory, which makes it more di icult to manage supply proper management of excess capacity, measuring and
and demand levels. maintaining quality
- A service is more of a unique o ering than a product. So providing it - Eg; empty seats on a plane
in a systematic and identical way is much more di icult.
- Unused capacity is lost forever. It cannot be used to create
something that is stored for later (i.e. inventory cannot be created).
10 1B Strategic In performance assessment, strategic management accounting can - Public sector does not use profit as its primary measure.
management help establish metrics for measuring:
accounting and the - economy—the extent to which resources of a given quality were
public sector acquired at the lowest cost; - e iciency—the maximisation of outputs
for a given set of inputs; and
- e ectiveness—the extent to which an organisation achieved its
objectives
11 1C Role of MA in MAs are seen as information providers for business processes, organisational planning and control, resource management and
strategic utilisation, and creation of value through e ective use of financial and non-financial resources.
management
11 1C Role of MAs Creating sustainable value by: - Role features include target costing, life cycle costing,
• supporting the formation, selection, implementation and evaluation competitor cost analysis, activity based costing and
of organisational strategy; and management, and strategic performance measurement
• providing information that captures financial and non-financial systems (Langfield-Smith 2008)
perspectives for both the internal and external environments to
enable e ective resource allocation.
11 1C Traditional Traditional management accounting Strategic management accounting
management - Job costing & process costing - Product costing & activity -based costing & management
accounting vs - Budgets - Life cycle analysis (including social and environmental costs
Strategic - Variance analysis and benefits)
management - Financial data - Value chain analysis
accounting - Financial, operational and qualitative data
- Competitor cost structures analysis
- Industry and broader economy analysis
11 1C Target Costing - Determines the selling price being charged by competitors, deducts
the required margin to calculate a target cost for producing the
product.
2
,12 1C Analyst, business Role of management accountant:
adviser, partner - Previously held a traditional role of costing, variance analysis and budgeting
- Now move to providing strategic support and risk management (e ective use of controls to manage risk is a valuable role of MA
(Cooper 2002))
- Design and manage information systems
- Develop e ective reporting methods
12 1C Perspectives on the role of MA - Business partner & Overseer
12 1C Business partner - Accountant can guide management actions, due tocapability in analytics and risk management
-Accountants are perceived as independent, objective and credible.
-Can provide a valuable service in areas such as strategic business planning, customer profitability management, cost management,
information management, competitive intelligence, forecasting, and cash flow maximisation.
12 1C Overseer -Where an accountant acts in a performance advisoryrole, they can risk losing independence.
-Providing oversight on top of deep involvement may involve conflict of interest or time pressures to perform either role e ectively.
-Therefore, it may be more appropriate for the accountant to provide oversight and set e ective controls. -Note that increased pressure
and perceived or actual loss of objectivity are some of the biggest issues facing accountants as they become more heavily involved in
the decision-making process.
13 1C Contemporary - A matrix of skills has been prepared by the International Accounting - The main categories include: Intellectual, Interpersonal &
skills & technique Education Standards Board (IAESB). Communication, Personal and Organisational
- It details what is required of today’s professional accountant in
business.
13 1C Intellectual • Evaluate information from many sources through research, analysis and integration
(Intermediate level • Apply professional judgement to reach well-reasoned solutions
of proficiency) • Solve unstructured problems
• Apply reasoning, critical analysis and innovative thinking to solve problems
• Identify when to consult specialists to solve problems
13 1C Interpersonal & • Cooperation & teamwork
Communication • Clear & concise communication both in writing & orally
(Intermediate level • Awareness of cultural and language di erences
of proficiency) • Active listening and interviewing techniques
• Negotiation skills to reach solutions & agreements
• Consultation skills to minimize & solve conflict, problems
13 1C Personal • Commitment to lifelong learning
(Intermediate level • Apply professional skepticism
of proficiency) • Set high standards of personal performance
• E ective time and resource management
• Open to challenges and new opportunities
13 1C Organisational • Undertake assignments to meet deadlines
(Intermediate level • Review works to comply with the organisation’s quality standards
of proficiency) • Apply management skills to motivate & develop others
• Delegate and lead others to work toward organizational goals
• Apply tools and technology to increase e iciency & e ectiveness
14 1C IFAC 2011 A report by IFAC (2011) looked at how management accountants drive sustainable organisational success. It identified four specific
ways in which management accountants support an organisation:
1. Creators of value—developing the plans and strategies that set the direction of theorganisation
2. Enablers of value—supporting management decision-making and implementation
3. Preservers of value—protecting value through e ective risk management, controls and compliance
4. Reporters of value—providing clear and detailed reporting.
15 1C Tools & Techniques SMA requires extension of traditional skills to incorporate following tools techniques:
- competitor analysis, customer cost and profitability analysis, supplier analysis and external benchmarking—including sustainability
perspectives
- industry- and organisation-level value analysis
• strategic costing, life cycle costing and target costing for strategy formulation
• activity-based costing and management for implementing strategic plans
• cost driver analysis, value analysis, benchmarking of operational processes & budget variance analysis
• strategic performance measurement systems (e.g. the BSC) for managing and controlling the implementation process—and for
supporting strategy formulation
15 1D Challenges for Some of the key challenges facing management accountants include:
MAs • using technology e ectively while guiding others to e ectively use management accounting systems (MASs);
• managing resources; and
• promoting innovation
15 1D Challenge: • Keeping information secure and maintaining customer privacy.
Technology • Maintaining records and audit trails for data verification.
• Technology is transforming how people compete within an industry, which is forcing rapid change and innovation.
15 1D Challenge: • E ective use and control of assets are required for superior results.
Managing • Mastering areas such as cash flow management and supply chain management (SCM) • Using forecasting tools to achieve reductions
resources in inventory levels
• Maintaining e ective links with suppliers
• Consider the management of intangible assets including knowledge
15 1D Challenge: • Innovation drives competitiveness by creating e iciencies and new and better products.
Innovation • Innovation is both an outcome—that is, a new product or service—and a process—a combination of decisions, structures, resources
and skills that produce outputs and outcomes. Investment in R&D is necessary.
• Needs to be customer focused, integrate market research information into MA’s analysis. Consistently generating new and improved
products, services and processes (e.g. Apple) is essential to creating customer value.
17 1D Causes of change The management reporting role has also expanded from just Weekly summaries and constant monitoring have replaced
in business producing the numbers, to analysing and interpreting the numbers monthly meetings, leading to rapid identification of issues
environment that are generated from the information systems. and opportunities, as well as faster response times
3
, 17 1D Cause of changing - Global economy Technology
business + Economic turmoil + Capital equipment
environment + Structural change + Information communication technology
+ Globalisation Internal structures
Sustainability + Flatter hierarchies
+ Environmental management acocunting + Outsourcing / o shoring
+ Stakeholders + Joint ventures
+ Ethics + Virtual o ices
+ Management reporting
17 1D Global economy: Deeply integrated and accessible economies and markets can lead to global contagion
Economic turmoil GFC in 2008 has increased focus on cash flows, access to funding, supply chain
Importance of risk management, forecasting, cost control and rapid adaptation
17 1D Global economy: Ongoing change in growth rates; government policy; government,
Structural change company, individual debt levels; consumer spending; new
regulations (e.g. BASEL Accords p19)
17 1D Global economy: The integration of international economic activity and the creation of Drivers (per Lasserre 2003):
Globalisation global production systems to service global markets. 1. Global competition (e.g. local market in decline, pursue
Impact on organisations by: rapid growth or lower cost raw materials and labours, avoid
• significant reductions in trade barriers, trade barriers, prevent low-cost competitors in local market)
• lower transport costs, 2. Physical and capability factors (e.g. advances in technology
• large multinational corporations, reduce international communication costs, lower cost
• unrestricted capital flows and shipping)
• faster information transfers. 3. Social factors and national cultures (convergence of tastes,
youthful demographics)
4. Legal and political systems (removal of trade barriers)
Challenges:
• taxation
• protection of intellectual property (IP)
• cross-border money laundering
• financing of illegal activities
22 1D Global economy: Org expand globally:
Globalisation: - Local market for product saturated or in decline
Global - Pursue rapid growth
competition - Focus on lower-cost raw materials & labour
- Defensive strategy when low-cost competitors enter domestic market
- Avoid trade barriers (e.g. quotas)
22 1D Global economy: A series of breakthroughs, particularly rapid advances in transport and communication, have provided a technological platform for
Globalisation: global activity. These advances, in turn, have encouraged:
Physical & • economies of scale—because goods produced in a central locationcan be cheaply distributed around the world
capability factors • outsourcing of component supplies to low-cost countries—because the transport costs across long distances are now more
a ordable.
22 1D Global economy: This convergence of tastes is compounded by increasing urbanisation and industrialisation across the world, with populations adapting
Globalisation: quickly to new products.
Social factors &
national cultures
22 1D Global economy: Trade barriers such as tari s are one of the main obstacles to successful globalisation. These are usually enacted by countries wishing
Globalisation: to protect their domestic economy from foreign competition
Legal & political
systems
23 1D Technology: Advancement in technology, higher productivity (e.g. in manufacturing – laser printing) Technology costs are much higher and become
Capital equipment obsolete at a much faster rate
Often requires significant capital investment and need to recover the investment in a shorter time frame because the technology is
obsolete.
23 1D Information and Cloud computing: reduced costs on capital items, reduced need for in-house knowledge, can deploy employees globally. Risk to data
communication loss, theft, privacy & jurisdictional issues.
tech (ICT) Employee owned devices: flexible working environment, but risk to loss of confidential info or IP.
Big data: big amount of data collected & stored in unstructured formats, but the ability to analyse this info provides significant insights
to improve performance.
25 1D Sustainability: Organisations are accountable more than just economic results and to a wider range of stakeholders (rather than the owners/ profit
Corporate social model) – which consider qualitative and non-financial factors when making decision
responsibility Various type of reporting, including environmental, social and sustainability
(CSR)
25 1D Sustainability: An increasing level of scrutiny associated with use and disposal of resources
Environmental EMA: develops EMASs to capture, analyse, report on environmental information and help improve performance using life cycle costing,
management full cost accounting, benefit assessment, strategic planning
accounting (EMA) EMASs: record physical flows of resources including volume and weights of inputs, outputs, waste, recycling and emission.
4
MODULE 1 INTRO TO SMA
3 1 Strategic Creating sustainable value, supporting strategy, synthesising
management information
accounting
3 1A Value Value is a broad concept. It can be described as combining resources
together in a manner that creates desirable outcomes.
3 1A Value creation Generate products people will pay and develop/improve resources,
activities and processes
3 1A Customer value Customer value: create an output that has customer value (need to
produce at a price lower than the price the customer is willing to pay,
which leads to profitability)
3 1A Stakeholder value Stakeholder value: a by-product of generating value in other areas.
- To create products or services, an organisation will require
community permission to operate, infrastructure, customers and
employees—who will only supply their e ort if the wages and
conditions are adequate. That is, the organisation must provide
suitable value to its stakeholders.
3 1A Types of value for Stakeholders vs Value to the stakeholder 4. Suppliers - Contracts that generate su icient revenue for
stakeholders 1. Owners - Financial returns, employment / career opportunities (if the costs involved, strong and reliable working relationships
also employees) 5. Employees - Appropriate reward for the e ort contributed
2. Lenders - Receive a return (interest) for the amount loaned to the to the company (both monetary and qualitative items, such
company (would destroy value if the company did not have su icient as recognition and job satisfaction)
funds to repay) 6. Community Groups - Products safe to use, sustainable raw
3. Customers - Products that comply with safety, environmental materials, recycled at end of use
standards etc, reasonable price, warranty
4 1A Value viewpoint Need to consider society's viewpoint as well as organisational.
4 1A Organisational Organisational viewpoint of value Society’s viewpoint of value
viewpoint vs 1. Cost cutting - reducing the number of sta by 10% to increase 1. Unemployment, financial pressure on communities and
Society Viewpoint profitability additional stress for employees who remain employed
2. Switching production to cheaper o shore locations with lower 2. Local unemployment, environmental degradation, and an
standards of employee and environmental protections increase in injuries and incidents among employees who
3. Massive price discounting of key items by supermarkets to gain receive little protection
market share, forcing suppliers to reduce prices 3. A small price reduction for individual consumers but at the
4. Selling additive products or services including gambling, alcohol expense of producers who are unable to remain viable
and cigarettes 4. Social issues in communities and an increase in health-
related costs
5 1A Strategic - Strategic management accounting is aimed specifically at improving Strategic management accounting aims to provide forward-
management organisational outcomes. looking information (not only focusing on internal accounting
accounting -Strategic management describes the process by which an information but also external information) to assist
organisation decides: management in decision-making.
• the direction it will take
• the industry it will operate within
• the types of products or services it will provide
• its structure, systems and processes
• its goals and objectives.
5 1A Evolution of Creating sustainable value by:
management • supporting the formation, selection, implementation and evaluation of organisational strategy; and
accounting to a • providing information that captures financial and non-financial perspectives for both the internal and external environments to enable
strategically e ective resource allocation.
focused role
6 1B Strategic Defines the organisation’s strategy and making choice process, evaluates the business and contemporary environment, and defines its
Management objectives and strategy.
Process
6 1B Strategic - Strategic management, which focuses on determining the direction - Operational management, which can be considered as the
management v and structure of the organisation and developing plans and objectives implementation phase of strategic management—turning the
Operational for achieving this; and strategy into reality.
management
6 1B Strategic The strategic management process involves:
management • addressing key issues, including determining the vision, mission and purpose of an organisation
• setting specific objectives
• creating and implementing the strategies to achieve these objectives
6 1B Strategic Management Process
1
,6 1B 1. Strategic - Scanning the internal and external organisational environment - Organisations must also analyse their own resources and
Analysis - Organisations must continuously analyse the external environment capabilities to understand how they might react to
to understand trends and changes that a ect the industry and the changes in the environment.
economy.
6 1B 2. Strategy - Strategy formulation is the next step in the strategic management
planning & Choice process.
- This includes developing specific strategies, actions and measures.
6 1B 3. Strategy Entails crafting an e ective organisational structure, organisational
implementation processes and culture
6 1B 4. Strategy - This involves measuring performance, providing feedback and
evaluation undertaking continuous review for improvement.
7 1B Operational - Senior managers focus on strategic tasks.
management (for - Operational managers focus on the medium- to short-term tasks.
middle managers)
8 1B Di erence btw Strategic management: Operational management
strategic & - Directly linked to survival of an organisation - Not directly related, but indirectly influences organisational
operational - Organisation-wide phenomenon survival
management - Long-term process - Relates to specific operations of the organisation
- Involves non-routine activities - Focused on short and medium terms
- Sometimes very ambiguous - Involves routine day-to-day activities
- Requires high-level strategic management orientation - Does not involve any ambiguity
- Manages critical success factors (CSFs) of the organisation - Requires tactical management orientation and focus on
doing, implementing and achieving operational excellence
- Performs activities on a day-to-day basis
9 1B Strategic - Flatter hierarchies have resulted in greater authority and decision
management making power delegated to lower level employees.
accounting and - MAs are required to provide support and training to line managers to
line managers enable them to prepare and communicate key performance
information to MA for analysing.
10 1B Strategic - A service is intangible, so it can be more di icult to define or - The same approaches and tools are used to analyse
management measure systematically. services, but the main characteristics of services can make
accounting and - Once a service is provided, it cannot be consumed or used again in this analysis more di icult.
service industries the same way as a product. This means there is no ability to store a - The important issues in a service environment include the
service as inventory, which makes it more di icult to manage supply proper management of excess capacity, measuring and
and demand levels. maintaining quality
- A service is more of a unique o ering than a product. So providing it - Eg; empty seats on a plane
in a systematic and identical way is much more di icult.
- Unused capacity is lost forever. It cannot be used to create
something that is stored for later (i.e. inventory cannot be created).
10 1B Strategic In performance assessment, strategic management accounting can - Public sector does not use profit as its primary measure.
management help establish metrics for measuring:
accounting and the - economy—the extent to which resources of a given quality were
public sector acquired at the lowest cost; - e iciency—the maximisation of outputs
for a given set of inputs; and
- e ectiveness—the extent to which an organisation achieved its
objectives
11 1C Role of MA in MAs are seen as information providers for business processes, organisational planning and control, resource management and
strategic utilisation, and creation of value through e ective use of financial and non-financial resources.
management
11 1C Role of MAs Creating sustainable value by: - Role features include target costing, life cycle costing,
• supporting the formation, selection, implementation and evaluation competitor cost analysis, activity based costing and
of organisational strategy; and management, and strategic performance measurement
• providing information that captures financial and non-financial systems (Langfield-Smith 2008)
perspectives for both the internal and external environments to
enable e ective resource allocation.
11 1C Traditional Traditional management accounting Strategic management accounting
management - Job costing & process costing - Product costing & activity -based costing & management
accounting vs - Budgets - Life cycle analysis (including social and environmental costs
Strategic - Variance analysis and benefits)
management - Financial data - Value chain analysis
accounting - Financial, operational and qualitative data
- Competitor cost structures analysis
- Industry and broader economy analysis
11 1C Target Costing - Determines the selling price being charged by competitors, deducts
the required margin to calculate a target cost for producing the
product.
2
,12 1C Analyst, business Role of management accountant:
adviser, partner - Previously held a traditional role of costing, variance analysis and budgeting
- Now move to providing strategic support and risk management (e ective use of controls to manage risk is a valuable role of MA
(Cooper 2002))
- Design and manage information systems
- Develop e ective reporting methods
12 1C Perspectives on the role of MA - Business partner & Overseer
12 1C Business partner - Accountant can guide management actions, due tocapability in analytics and risk management
-Accountants are perceived as independent, objective and credible.
-Can provide a valuable service in areas such as strategic business planning, customer profitability management, cost management,
information management, competitive intelligence, forecasting, and cash flow maximisation.
12 1C Overseer -Where an accountant acts in a performance advisoryrole, they can risk losing independence.
-Providing oversight on top of deep involvement may involve conflict of interest or time pressures to perform either role e ectively.
-Therefore, it may be more appropriate for the accountant to provide oversight and set e ective controls. -Note that increased pressure
and perceived or actual loss of objectivity are some of the biggest issues facing accountants as they become more heavily involved in
the decision-making process.
13 1C Contemporary - A matrix of skills has been prepared by the International Accounting - The main categories include: Intellectual, Interpersonal &
skills & technique Education Standards Board (IAESB). Communication, Personal and Organisational
- It details what is required of today’s professional accountant in
business.
13 1C Intellectual • Evaluate information from many sources through research, analysis and integration
(Intermediate level • Apply professional judgement to reach well-reasoned solutions
of proficiency) • Solve unstructured problems
• Apply reasoning, critical analysis and innovative thinking to solve problems
• Identify when to consult specialists to solve problems
13 1C Interpersonal & • Cooperation & teamwork
Communication • Clear & concise communication both in writing & orally
(Intermediate level • Awareness of cultural and language di erences
of proficiency) • Active listening and interviewing techniques
• Negotiation skills to reach solutions & agreements
• Consultation skills to minimize & solve conflict, problems
13 1C Personal • Commitment to lifelong learning
(Intermediate level • Apply professional skepticism
of proficiency) • Set high standards of personal performance
• E ective time and resource management
• Open to challenges and new opportunities
13 1C Organisational • Undertake assignments to meet deadlines
(Intermediate level • Review works to comply with the organisation’s quality standards
of proficiency) • Apply management skills to motivate & develop others
• Delegate and lead others to work toward organizational goals
• Apply tools and technology to increase e iciency & e ectiveness
14 1C IFAC 2011 A report by IFAC (2011) looked at how management accountants drive sustainable organisational success. It identified four specific
ways in which management accountants support an organisation:
1. Creators of value—developing the plans and strategies that set the direction of theorganisation
2. Enablers of value—supporting management decision-making and implementation
3. Preservers of value—protecting value through e ective risk management, controls and compliance
4. Reporters of value—providing clear and detailed reporting.
15 1C Tools & Techniques SMA requires extension of traditional skills to incorporate following tools techniques:
- competitor analysis, customer cost and profitability analysis, supplier analysis and external benchmarking—including sustainability
perspectives
- industry- and organisation-level value analysis
• strategic costing, life cycle costing and target costing for strategy formulation
• activity-based costing and management for implementing strategic plans
• cost driver analysis, value analysis, benchmarking of operational processes & budget variance analysis
• strategic performance measurement systems (e.g. the BSC) for managing and controlling the implementation process—and for
supporting strategy formulation
15 1D Challenges for Some of the key challenges facing management accountants include:
MAs • using technology e ectively while guiding others to e ectively use management accounting systems (MASs);
• managing resources; and
• promoting innovation
15 1D Challenge: • Keeping information secure and maintaining customer privacy.
Technology • Maintaining records and audit trails for data verification.
• Technology is transforming how people compete within an industry, which is forcing rapid change and innovation.
15 1D Challenge: • E ective use and control of assets are required for superior results.
Managing • Mastering areas such as cash flow management and supply chain management (SCM) • Using forecasting tools to achieve reductions
resources in inventory levels
• Maintaining e ective links with suppliers
• Consider the management of intangible assets including knowledge
15 1D Challenge: • Innovation drives competitiveness by creating e iciencies and new and better products.
Innovation • Innovation is both an outcome—that is, a new product or service—and a process—a combination of decisions, structures, resources
and skills that produce outputs and outcomes. Investment in R&D is necessary.
• Needs to be customer focused, integrate market research information into MA’s analysis. Consistently generating new and improved
products, services and processes (e.g. Apple) is essential to creating customer value.
17 1D Causes of change The management reporting role has also expanded from just Weekly summaries and constant monitoring have replaced
in business producing the numbers, to analysing and interpreting the numbers monthly meetings, leading to rapid identification of issues
environment that are generated from the information systems. and opportunities, as well as faster response times
3
, 17 1D Cause of changing - Global economy Technology
business + Economic turmoil + Capital equipment
environment + Structural change + Information communication technology
+ Globalisation Internal structures
Sustainability + Flatter hierarchies
+ Environmental management acocunting + Outsourcing / o shoring
+ Stakeholders + Joint ventures
+ Ethics + Virtual o ices
+ Management reporting
17 1D Global economy: Deeply integrated and accessible economies and markets can lead to global contagion
Economic turmoil GFC in 2008 has increased focus on cash flows, access to funding, supply chain
Importance of risk management, forecasting, cost control and rapid adaptation
17 1D Global economy: Ongoing change in growth rates; government policy; government,
Structural change company, individual debt levels; consumer spending; new
regulations (e.g. BASEL Accords p19)
17 1D Global economy: The integration of international economic activity and the creation of Drivers (per Lasserre 2003):
Globalisation global production systems to service global markets. 1. Global competition (e.g. local market in decline, pursue
Impact on organisations by: rapid growth or lower cost raw materials and labours, avoid
• significant reductions in trade barriers, trade barriers, prevent low-cost competitors in local market)
• lower transport costs, 2. Physical and capability factors (e.g. advances in technology
• large multinational corporations, reduce international communication costs, lower cost
• unrestricted capital flows and shipping)
• faster information transfers. 3. Social factors and national cultures (convergence of tastes,
youthful demographics)
4. Legal and political systems (removal of trade barriers)
Challenges:
• taxation
• protection of intellectual property (IP)
• cross-border money laundering
• financing of illegal activities
22 1D Global economy: Org expand globally:
Globalisation: - Local market for product saturated or in decline
Global - Pursue rapid growth
competition - Focus on lower-cost raw materials & labour
- Defensive strategy when low-cost competitors enter domestic market
- Avoid trade barriers (e.g. quotas)
22 1D Global economy: A series of breakthroughs, particularly rapid advances in transport and communication, have provided a technological platform for
Globalisation: global activity. These advances, in turn, have encouraged:
Physical & • economies of scale—because goods produced in a central locationcan be cheaply distributed around the world
capability factors • outsourcing of component supplies to low-cost countries—because the transport costs across long distances are now more
a ordable.
22 1D Global economy: This convergence of tastes is compounded by increasing urbanisation and industrialisation across the world, with populations adapting
Globalisation: quickly to new products.
Social factors &
national cultures
22 1D Global economy: Trade barriers such as tari s are one of the main obstacles to successful globalisation. These are usually enacted by countries wishing
Globalisation: to protect their domestic economy from foreign competition
Legal & political
systems
23 1D Technology: Advancement in technology, higher productivity (e.g. in manufacturing – laser printing) Technology costs are much higher and become
Capital equipment obsolete at a much faster rate
Often requires significant capital investment and need to recover the investment in a shorter time frame because the technology is
obsolete.
23 1D Information and Cloud computing: reduced costs on capital items, reduced need for in-house knowledge, can deploy employees globally. Risk to data
communication loss, theft, privacy & jurisdictional issues.
tech (ICT) Employee owned devices: flexible working environment, but risk to loss of confidential info or IP.
Big data: big amount of data collected & stored in unstructured formats, but the ability to analyse this info provides significant insights
to improve performance.
25 1D Sustainability: Organisations are accountable more than just economic results and to a wider range of stakeholders (rather than the owners/ profit
Corporate social model) – which consider qualitative and non-financial factors when making decision
responsibility Various type of reporting, including environmental, social and sustainability
(CSR)
25 1D Sustainability: An increasing level of scrutiny associated with use and disposal of resources
Environmental EMA: develops EMASs to capture, analyse, report on environmental information and help improve performance using life cycle costing,
management full cost accounting, benefit assessment, strategic planning
accounting (EMA) EMASs: record physical flows of resources including volume and weights of inputs, outputs, waste, recycling and emission.
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