News highlights for January 2015

Effective management accounting practices can improve decision-making in organizations, which need sound fundamentals but also speed when trying to decide which strategic paths to follow. In short, organizations need principles that can be applied to help produce favorable outcomes.

The Global Management Accounting Principles represent the first set of universal principles to guide the practice of management accounting.

The principles, prepared in a comprehensive report released by the AICPA and the Chartered Institute of Management Accountants (CIMA), are based on insights from a global sampling of CEOs, CFOs, academics, and other professionals. The report is available at tinyurl.com/p2tf3rl.

The four principles, focused on four outcomes, are intended to provide senior executives with strategic and financial oversight a way to benchmark their management accounting processes and identify where those processes can be improved.

The goal of the principles is to establish values, qualities, and norms that represent the profession’s best practices.

The purpose of the principles, in four key points, is to:

• Outline the fundamental values and qualities that represent management accounting.
• Improve understanding of the management accounting profession.
• Increase recognition of the crucial role of management accounting in organizations and ensure that is it used at the highest levels.
• Enable management accounting potential to be realized.

A global survey commissioned by CIMA and the AICPA and conducted in August by Longitude Research shows that organizations are rethinking their decision- making processes and hoping to make better use of available information. But few (36%) said they can easily ensure consistent, quality decisions at all organizational levels, and 89% said a stronger partnership with finance in decision-making would help them better manage their organizations in the future.

The principles are intended to be applied to all levels and types of organizations: large or small, public or private.

The four principles are:

• Communication provides insight that is influential. Good management accounting begins and ends with conversations, allowing management to cut across silos and create a path to integrated thinking.
• Information is relevant. One of management accounting’s central roles is providing decision-makers the right information on a timely basis. If the needs of the decision-maker are understood, then identification, collection, validation, preparation, and storage of timely information can be carried out.
• Impact on value is analyzed. This principle requires a thorough understanding of the business model and the macroeconomic environment. Strong management accounting functions are able to turn information into insight by assessing the impact of scenarios being considered.
• Stewardship builds trust. The principles require active management of relationships and resources “so that the financial and non-financial assets, reputation and value of the organisation are protected.”