challenges faced by management accounting profession

The Changing Business Environment and its Implications in Management Accounting

Jaymee MarquinaMa. Einna Bianca NuguidNovel Elaine Porley

marquina.nuguid.porley

◦Known as the “Modern” Management Accounting Period (1950s-1980)

◦Characterized by new researches as a result of which academic accountants provided new decision-making tools for managers.

◦Such tools are based on the following assumptions: Tasks are routinised at the managerial and

operational levels. The external environment is stable with few

price or demand fluctuations The Sole purpose of management accounting

is to aid decision-making.

First Management Accounting Revolution (1950s-1980)


Management Accounting education is formalized. It has been introduced into the curriculum of Master of Business Administration (MBA) at both Harvard University and MIT directly after World War II.



It focused on the following questions:

◦how to formulate or analyze new problems

◦appropriate measure of cost

Placed much greater emphasis on the decision-making role of cost management than on techniques to determine costs.



The direct costing controversy in 1950s- differs from absorption costing

Mathematics of management accounting in 1960s

- Concepts: Marginal Costing Discounted Cash Flows Statistical Cost

Estimation- emphasized the notion that MA

was capable of providing models and measures that could enhance management decisions making.



The Second Management Accounting Revolution (1980-1999)

Post-Modern Period or the New Wave of Management Accounting

Developments caused a division between management accounting educators and researchers

It is characterized by a shift from the mechanistic view of organizations to acknowledging a complex set of organizational interdependencies.


1. Measurement Issues2. Control Issues

The introduction of the balanced scorecard is crucial to the development of measurement and control issues.

The Second Management Accounting Revolution (1980-1999)


20th CenturyRapid development for the field started

when Scientific Management sought to identify what Costs should be and economic organizations begun to use budgets and relate returns to levels of investment.

A book named Relevance Lost: The Rise and Fall of Management Accounting became best seller and sets off a new wave of innovation and interest in the Management Profession worldwide.


20th CenturyTechnical Innovations are as follows:

Activity-Based Cost ManagementBalanced Score CardBenchmarkingLife Cycle CostingTarget CostingEconomic Value Added MeasuresStrategic Cost Management


20th CenturyInnovations in other fields

◦Total Quality Management◦Six Sigma◦Kaizen◦Business Process Engineering


Continuous Learning

Ways to continue building one’s knowledge based on the field of Management Accounting:

Certified Management Accountants (CMAs) are required to achieve continuing education hours every year, similar to a Certified Public Accountant.

A company may also have research and training materials available for use in a corporate owned library.


Management Accounting Tasks and Services ProvidedRate & Volume AnalysisBusiness Metrics DevelopmentPrice ModelingProduct ProfitabilityGeographic vs. Industry or Client Segment

ReportingSales Management ScorecardsCost AnalysisCost Benefit AnalysisCost-Volume-Profit AnalysisLife cycle cost analysis

http://en.wikipedia.org/wiki/Cost-Volume-Profit_Analysis

http://en.wikipedia.org/wiki/Life_cycle_cost_analysis


Client Profitability AnalysisIT Cost TransparencyCapital BudgetingBuy vs. Lease AnalysisStrategic PlanningStrategic Management AdviseInternal Financial Presentation and

CommunicationSales and Financial ForecastingAnnual BudgetingCost Allocation

Management Accounting Tasks and Services Provided

http://en.wikipedia.org/wiki/IT_Cost_Transparency

http://en.wikipedia.org/wiki/Cost_Allocation


“The most exciting and innovative work in Management today is found in Accounting”

-Peter Drucker, 1990


Thank you!

challenges faced by management accounting profession

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