Tài liệu ACCA mới nhất từ BPP môn P5

Tài liệu ACCA mới nhất từ BPP môn P5, sách có giá trị cho kỳ thi đến tháng 6-2014, Passcard. File PDF dạng Text cực đẹp.

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Welcome to BPP Learning Media's ACCA Passcards for Professional Paper P5 Advanced Performance

Management

= They focus on your exam and save you time

= They incorporate diagrams to kick start your memory

= They follow the overall structure of the BPP Learning Media’s Study Texts, but BPP Learning Media's ACCA

Passcards are not just a condensed book Each card has been separately designed for clear presentation

Topics are self contained and can be grasped visually

= ACCA Passcards are still just the right size for pockets, briefcases and bags

= ACCA Passcards should be used in conjunction with the revision plan in the front pages of the Kit The plan

identifies key questions for you to try in the Kit

Run through the Passcards as often as you can during your final revision period The day before the exam, try

to go through the Passcards again! You will then be well on your way to passing your exams

1 Introduction to strategic management

accounting 1 12 Scope of strategic performance

2 Alternative approaches to budgeting for measures in the private sector 79

control 17 T13 Strategic performance issues in complex

3 Changes in business structure and business structures

management accounting 25 14 Divisional performance and transfer

4 Effect of information technology on pricing Issues - 91

modern management accounting 347 15 Scope of strategic performance measures

5 Impact of world economic and market in not-for-profit organisations

trends 43 16 Behavioural aspects of performance

policy on performance 47 Tỉ Alternative views of performance

7 Other environmental and ethical issues 51 measurement có 113

8 Management accounting and information 18 Non-financial performance indicators 117

systems 55 «19 Predicting and preventing corporate

14 Performance hierarchy 74 «21 Current issues and trends in performance

Techniques and influences

The chapter also explains how organisations set strategic

plans and control their outcomes

There is an explanation of some of the techniques used

to do this and finally a review of factors that affect

strategic planning

Planning, control, decision making Corporate Strategic and operational Multinational Techniques and

and management information planning planning and control aspects influences

The process of deciding on the objectives of the

organisation, on changes in these objectives, on the Generally formulated in writing

resources used to attain these objectives, and on the Widely circulated

policies that are to govern the acquisition, use and Triggers not direct action, but series of lesser

disposition of the resources plans

Includes selection of products, purchase of fixed

assets, required levels of company profit

Long term and wide scope

Strategic information

Strategic decisions

Generally externally sourced ’ > ’

About customers, state of market, legislation etc Most strategic decisions are unique, so the

Includes total cash needs, availability and cost information needed to support them is likely to be

of raising new funds ad-hoc and specially tailored to the decision

Prepared on an ad-hoc basis : : Discounted cash flow techniques should be used

Often approximate and imprecise where possible

Management control

The process by which managers ensure that

resources are obtained and used effectively and

efficiently in the accomplishment of the organisation’s

objectives It is sometimes called tactics or tactical

planning

Management accounting information for

strategic planning and decision making

= Incorporates forecasts/estimates/risk and

uncertainty analysis

= Has an external orientation

= Forward looking and outward looking

= Helps to ensure goal congruence

Page 3

Characteristics Short-term and non-strategic Management control planning activities include preparing annual sales budget

Management control activities include ensuring budget targets are (at least) reached Carried out in a series of routine and regular planning and comparison procedures Management control information covers the whole organisation, is routinely

collected/disseminated, is often quantitative and

commonly expressed in money terms

- Cash flow forecasts

- Variance analysis reports

and management information

Corporate planning

Management control and strategic planning compared

The decision to launch a new brand of frozen foods is a strategic plan, but the choice of ingredients for the

meals is a management control decision

Long-term strategic plans can conflict with the shorter-term objectives of management control

= Performance measures/control measures do not take strategic direction into account

= Strategic imperatives might not be properly communicated to middle management

= Strategic planning information might be difficult to measure

Operational control/planning

The process of ensuring that specific Strategic plan

tasks are carried out effectively and = Short-term and non-strategic

sales should increase by 5% pa for at least five years organisation's activities and ¬ _

Management control Wanacement control decisi needed for day to day

nagement control decision implementation of plans

V operational control

mone nenouly foeused cared a Operational control decision = Information likely to have an

within a shorter time frame and taken — Managers of sales territories

by managers less senior in the

organisation

Operational control focuses on

individual tasks whereas

management control is concerned cash receipts

with the sum of all tasks

Page 5

Characteristics

Sales quotas are assigned to = Often carried out at short

endogenous source, to be specify weekly targets for each detailed transaction data,

sales representative quantitative and expressed in

Planning, control, decision making

and management information

Multinational aspects

GOALS

"he ren slender Often the same

Terms used interchangeably

OBJECTIVES

How the mission can be achieved

Desirable outcomes of corporate activi

lo § vaths We Companys internal resources and

eg PEST factors, competitive forces, Oppedutee, Tiưeols Gap melysis facilities: current performance,

eg Marketing strategies, production Assess actual performance in the

strategies ight of plans etc

Jj

Page 7 1: Introduction to strategic management accounting

Planning, control, decision making

and management information

Strategic planning Freewheeling opportunism Matching strategic planning with

freewheeling opportunism is not

A measured framework to plan Suggests firms should not What eapetts of oan

activities in a sequence and to bother with strategic plans and life are to be planned and

programme the behaviour of the should exploit opportunities as identifying how potential

and evaluated

Where planning activities can be focused =<!

A freewheeling opportunism

= Running existing business effectively approach can then be adopted

= Determining the resource capability of the organisation and its „- 10 exploit an organisation's

competencies competencies

= Planning environmental scanning activities so that opportunities are

effectively sought and assessed for alignment with mission,

resource capability and management expertise

SWOT analysis

Planning, control, decision making

and management information

Linking strategy and

operations

‘The achievement of long-term

goals will require strategic

planning which is linked to short-

term operational planning If

there is no link between strategic

planning and operational

planning the result is likely to be

unrealistic plans, inconsistent

goals, poor communication

and inadequate performance

measurement,

(George Brown)

Strategic and operational

planning and control

Strategic planning and control versus operational planning and control

Strategic Operational

‘Broad brush’ targets Detailed Whole organisation Activities of department External input Mainly internal information

External focus Internal focus, on actual procedures

Future orientated, feedforward More concerned with monitoring

current performance against plan

Potential for double loop Mainly single loop feedback feedback (ie opportunity to (performance must change, not the

change the plan) plan)

Planning, control, decision making

and management information

planning and control

Corporate planning Multinational aspects

Techniques and influences

Strategic control Desirable features of strategic

To encourage the measurement of the performance measures The key to strategic control IS _ right things, organisations can institute

ensuring that the right things formal or informal systems of strategic

= False alarms identification of milestones of er d nicat

ae eres ete thee = Support organisational learning

organisation = Provide a basis for reward

= Measurable Guidelines to opfimum number of

= Gaps are important areas milestones and degree of formality

that are neglected (eg

Planning, control, decision making

and management information Multinational

aspects

Corporate

planning

Strategic and operational

planning and control

Techniques and influences

Reasons for opening a foreign subsidiary include competitive strategy (cost leadership, differentiation, focus),

natural resources strategy (exploitation), manufacturing strategy, commercial strategy (defensive) and

investment strategy (ie not necessarily for manufacturing reasons)

Establishing realistic standards

Determining controllable cash flows

= Exchange rate fluctuations = Risk = Political factors (often significant in

= Transfer prices = Workforce = Technological factors (eg training problems

= Government policy = Life cycle in international businesses)

Page 11 1: Introduction to strategic management accounting

Planning, control, decision making

and management information

Corporate planning

Diseconomies of scale

Scale and spread of a multinational can be justified if they

add value to shareholders through increased economies of

scale If multinationals become too complex, the resulting

problems of financial control and managerial motivation

outweigh the advantages of size and spread

Money and trade

Exchange rate risk motivates companies to both buy from

and sell to the same countries if possible

Financial hedging devices can manage exchange rate risk

Purchasing power parity exchange rates remove the

distorting effects of inflation

Strategic and operational planning and control

= Tariffs (tax on imports)

= Non-tariff barriers (eg import quotas)

= Exchange controls

= Exchange rate policy

= Unofficial non-tariff barriers (eg onerous quality and inspection procedures)

Strategic and operational

planning and control

aspects

How SWOT can guide strategy formulation

A critical appraisal of the strengths and

weaknesses, opportunities and threats in Strengths Weaknesses

relation to the internal and external Internal to =

environmental factors affecting an the company a Conversion

organisation, in order to establish its = |

condition prior to the preparation of a long- — =

term plan Exist = Conversion

A strengths and weaknesses analysis indepe dently = Threat

establishes strengths that should be compan Opportunities reas

exploited and weaknesses that should be pany

improved The opportunities and threats

might arise from general environment (PEST) :

Techniques used include Boston Consulting win manne NES ¢ reals |

opportunities opportunities Group and Porter's five forces

Planning, control, decision making

and management information

and comparators, > Competitive

through whose use

relative levels of re an - Strategic ;

particularly areas of

underperformance) Advantages

can be identified By ; ' _

the adoption of ™ Provides basis for establishing

identified best standards of performance

practices, itis hoped | ™ Sets targets that are

that performance will achievable

improve | Can be a spur to innovation

Strategic and operational planning and control

A type of competitive benchmarking aimed at

strategic action and organisational change

Disadvantages Implies one best way of doing things

Yesterday's solution for tomorrow's problem

x] Catching-up exercise Depends on accurate information about

comparator companies

Government policy

Can affect organisations across many areas

Risk and uncertainty

Strategic planning deals with future events: the future

Legal factors Criminal, company, “

employment aa Strategic planning is therefore susceptible to risk and Competition and tax law uncertainty, much of which is exogenous

Competition Competition Commission

policy Types of risk and uncertainty

Stability of War, chaos, corruption

Global business WTO, IMF, EU Economic (not even government forecasts are perfect)

regulation Business (eg new competitors)

Product life cycle (different risks exist at different stages) Political (eg sanctions)

Financial (eg risk to stakeholders caused by debt finance)

Page 15 1: Introduction to strategic management accounting

Planning, control, decision making

and management information Multinational

aspects

Corporate planning Strategic and operational planning and control

Techniques and

influences

The life cycle and long-term survival

Although not all products inevitably go into decline, organisations need to be aware of life cycle issues, so that

their products generate enough cash to allow for investment in new products

Ideally organisations should have a number of different products at different stages in the life cycle

= New products at introduction’ growth stages, which will mature and generate cash

= Mature products already generating cash for new investment

= Products in decline to be harvested

Not-for-profit organisations and their specific budget issues are considered Then modern developments are

noted in Beyond Budgeting Finally, we look at how

behaviour can affect budgeting for control

mean different things to different people

As a budget has different purposes, it might D1011 000 ee

Ensures organisations objectives

Establishes a system of control

Provides a means of performance

evaluation

Motivates employees to improve

performance

Forecast Yardstick Target Means of allocating resources

AIternafive budget systems Incremental

Flexible Zero based Rolling

Beyond Behavioural budgeting aspects

You should know the detail behind the following points

Long-term plan Limiting factor Budget manual Sales budget Production capacity Functional budgets Discretionary costs Consolidation and coordination Cash budget Master budget

II

Strengths and weaknesses

Pros Cons

M Easyto [& Encourages EI_ Responds to

prepare siack environmental

x] Assumes change

3'E’s in -

place M Reviews cost

behaviour closely

l4] Time in an unstable consuming consuming environment El Not

] Needs MM Most recent necessary

MM Looks at activity indepth

Not-for-profit Beyond Behavioural

eee Er Loin budgeting aspects

Not-for-profit organisation

An organisation whose prime goal is not assessed by

economic measures

Funding

Funding comes from government rather than users

and is a political decision So no clear link

between providing more service and funding

Poor performance can lead to higher levels of

funding

Bois

Planning

The political system affects planning Changes in

priorities and funding can be imposed at will

Limited control is offered over funding

Budgeting

Characterised by incremental, short-term (one

Beyond Budgeting is a set of guiding principles that

propose abandoning traditional budgets in favour of an

alternative general management model based on

decentralised decision making, personal respon-

sibility, maximising value and adaptability to change

Two fundamental concepts underlie the Beyond

Budgeting approach:

= Adaptive management processes

= Devolved organisation and decision making

Page 21

Not-for-profit Beyond Behavioural

organisations budgeting aspects

Criticisms of traditional budgeting (Hope and Fraser)

= Add little value

= Waste valuable management time

= Can result in dysfunctional behaviour

= Conflict between communicating corporate goals and financial control

= Often based on bargaining and not the best model of resource consumption

= = |ncompatible with a drive towards continuous

= The budget is seen as a pressure device

= The accounting department is seen as the enemy

= Goal congruence is hard to achieve

= Budgets are used to express leadership style

Not-for-profit Beyond Behavioural organisations budgeting aspects Bargaining

‘Behind the essential technical facade of the budgetary procedures lies a prior and less formal

bargaining process in which the managers compete for organisational resources Since the amounts requested often have an important

Participation Factors affecting

effectiveness of

Conventional wisdom is that [0000197100901

when individuals participate they

will be more satisfied and more

productive, they will adapt more

quickly and communication will be

easier Research does not confirm

this view

Nature of task Organisation structure Personality

(Hopwood)

13

Participation

Budget-setting styles

= Imposed (from the top down)

= Participative (from the bottom up)

= Negotiated

Advantages of participative approach include

M More realistic budgets

™M Co-ordination, morale and motivation improved

M Increased management commitment to

objectives

Disadvantages of participative approach include

[x] More time-consuming

(*] Budgetary slack may be introduced

1 Can support ‘empire building’

Despite conventional assumptions, research

suggests accounting performance measures

lead to a lack of goal congruence

Budgeting Not-for-profit Beyond Behavioural

organisations budgeting aspects

Conflict between personal and corporate aspiration

The budgetary control system should be designed so that if managers are working in their own best interests

they also act in harmony with the goals of the organisation as a whole (goal congruence), but T

Factors which cause conflict Badly defined organisational objectives

Multiple organisational objectives

Different perceptions of the same objectives

An effective system of budgetary control (Dew and McGee)

Management authority and responsibility must be clear

Lack of social interaction between different departments Managers must accept budgets

Conflicting sources of information

Different/competing reward structures

Political manipulation

Influence of trade unions, government, changing

technology, markets and the environment

Managers must understand informati budgetary control Managers must be properly trained in budgetary control

Managers must understand the aim of budgetary Tế ve

14

3: Changes in business structure and

management accounting

Change is a fact of life in all organisations

This chapter considers several aspects of change and techniques that have been developed to measure

Business structure/information

Business integration

Business process re-engineering

Activity based management

structure/information

Changing competitive environment

Then Manufacturing Pre 1970s, there was little overseas

organisations competition, costs were passed on to

customers, minimal efforts were made to

maximise efficiency/reduce costs/improve management practices

Service organisations Pre 1980s, many were government-owned

monopolies or protected by highly regulated,

non-competitive environments Cost

increases were covered by increasing prices

Cost systems were not deemed necessary

Product life cycles Organisations could rely on years of high

demand for products

Business process re-engineering Team and

empowerment Activity based

management

Now There is massive overseas competition, and global networks

for acquiring raw materials and

distributing high quality, low-priced goods

Privatisation and deregulation has

resulted in intense competition, an increasing product range and a

need for sophisticated costing systems

Competitive environment,

technological innovation and

discriminating and sophisticated customer demand require continual product redesign and quick time to

15

Changing customer requirements

Successful organisations make customer satisfaction

their priority

New management Key success factors tan

Continuous improvement Cost efficiency

Quality Employee

empowerment Time

Total value chain Innovation analysis

= Group technology/repetitive manufacturing

= Dedicated cell layout

Manufacturing processes must be sufficiently flexible both to accommodate new product design and to satisfy the demand for greater

Total Quality Management (TQM) product diversity

The process of focusing on quality in the management of all resources and relationships in the organisation

Page 27 3: Changes in business structure and management accounting

To compete, organisations need to

Be innovative and flexible

Be able to deal with short product life

cycles

Be able to offer product variety whilst

maintaining or reducing costs

Reduce set-up times and inventories

Have the greatest possible manufacturing

flexibility

AMT helps them to do this

= Computer-aided design (CAD)

= Computer-aided manufacturing (CAM)

= Flexible manufacturing systems (FMS)

= Electronic data interchange (EDI)

Business process re-engineering

Team and empowerment Activity based

management

Production management strategies

The traditional approach to determining materials requirements is to monitor the level of stocks constantly so that once they fall to a preset level they can be re-ordered

This ignores relationships between different stock lines (demand for a particular item is dependent on demand for assemblies/subassemblies of which it forms a part)

Modern computer techniques integrate such relationships into the stock ordering process

Production management strategies linked to

AMT

Materials requirement planning (MRPI) Manufacturing resource planning (MRPII) Enterprise resource planning (ERP) Optimised production technology (OPT) Just-in-time (JIT)

Changing business Business Business

environment structure/information integration

form = Functions tend to be isolated

Divisional = Autonomy lower down the organisation

form = Formal communication between centre and divisions

= Use of transfer prices to set performance standards Network = Lateral communication

Performance measurement

= Economies of scale

= Hard to identify results to products

= People don't understand how whole business works

= Freedom to set standards by divisional managers

= Tendency to usurp divisional profits

= Outsourcing of personnel and assets

form Information and advice rather than instructions and is common

commands = Functions and services shared

between organisations

Page 29 3: Changes in business structure and management accounting

Changing business Business Business Business process Activity based Team and

environment structure/information integration re-engineering management empowerment

Business integration McKinsey 7S model

All aspects of a business must The McKinsey 7S model describes the links between the organisation’s

behaviour and the behaviour of individuals within it

be aligned to secure the most

efficient use of the organisation's

resources to achieve its

objectives effectively ‘Hard’

| STRATEGY SYSTEMS |

SHARED

VALUES | SYSTEMS Lema Z3 STYLE 9 ‘Soft

17

People implement the strategy

: People |, ""bureus its mission: human «| Strate

Linkage between " ¬

people, operations, NN 4

People must £ Strategy Is made or broken

strategy and - eee, ee sporti

= Quantity = Motivation = Direction

= Skills level = Deployment = Implications for resources

Page 31 3: Changes in business structure and management accounting

Changing business Business Business Business process Activity based Team and

environment structure/information integration re-engineering management empowerment

Value chain

The value chain is one possible model of business

integration It provides an overall perspective of the

activities of the business, which might easily be seen

in isolation in functional departments

The ultimate value a firm creates is measured by the amount customers are willing to pay for its products/services above the cost of carrying out

Business process re-engineering

The fundamental rethinking and radical

redesign of business processes to achieve

dramatic improvements in critical

contemporary measures of performance such

as cost, quality, service and speed

A process is a collection of activities that takes

one or more kinds of input and creates an

Business process Activity based Team and

re-engineering management empowerment

Principles of BPR which influence systems

= There is no differentiation between information

gathering and information processing

= Geographically-dispersed resources should be treated as if they were centralised

= Parallel activities should be linked, not integrated

= There is no distinction between workers and managers

= Information should be captured once, at source

environment

Business process re-engineering

Performance measurement

There will be a need to identify where value is being

added

ABC might be used to model the business processes

Complexity of the reporting system will depend on organisational structure

New variances may need to be developed

19

Changing business Business Business Business process Activity based Team and

environment structure/information integration re-engineering management empowerment

Aspects of ABM

= Cost reduction (by controlling/reducing cost driver incidence) and process improvement

= Activity analysis

— Value-added and non-value added = — Core/primary, support and diversionary/discretionary

= Design decisions (provide cost driver information to ensure the production of low cost products meeting

customers’ requirements)

= Cost driver analysis

— Unit level costs -Batch level costs —- Productíprocess level costs | — Organisational/facility costs

= Continuous improvement (eliminate non-value-added activities)

Page 35 3: Changes in business structure and management accounting

Changing business Business Business Business process Activity based Team and

environment structure/information integration re-engineering management empowerment

Characteristics of information needs of a team-based/empowered organisation

=~ Mixture of financial and non-financial Relevance

information Teams carry out activities but may Aggregation It should still be possible to obtain a

not know the financial implications broad view of how the organisation is doing

Transparency and immediacy Teams need Responsibility centres A budget for each team

information quickly if they are to work flexibly might be required, as determined by the

Common data definitions These are necessary activities in which it is involved

to enable comparison between teams

Information must be disseminated throughout the organisation rather than handed down through the hierarchy

Employees need to be given responsibility and the authority to make decisions

within defined parameters

Rather than issue orders, managers must be able to create conditions in which the organisation can prosper and front line staff must be able to deliver

appropriate customer service

setiess Then we assess how modern IT systems have enabled

Input and access to data the remote input of and instant access to management

accounting data

MIS and management accounting

systems Finally we consider how and why management

accounting systems develop

| manufacturing and services

Information for manufacturing planning, control

and decision making

= Cost behaviour = = Innovation

= Quality = Valuation

= Time

access to data accounting systems

Characteristics that distinguish services from

Services Service industries in particular rely on their staff

and so management information must include

intangible factors such as how customers feel about the service, as well as the key drivers of service costs (eg repeat business, churn rate)

The information required may vary

depending on whether the

organisation offers mass services

Information for Input and MIS and management

manufacturing and services access to data accounting systems Remote input of data Instant access to data

A number of data capture techniques allow staff to Via distribution of data

input data to the organisation’s system whether or

not they are in the office

= Laptop computers

= Bar coding and EPOS devices

Via sharing of data

= Voicemail systems

= E-mail

Software that can be used by collaborative work groups (messaging, ‘views’ of an information

database, public folders)

An internal network used to share information Remote access is quick and easy

A network accessible to authorised outsiders A popular means for business partners to

Information for Input and MIS and management

manufacturing and services access to data accounting systems

Provide a comprehensive file of data for a number of different users Avoid data redundancy and wastage of space, and reduce errors/inconsistencies from multiple data input

Software systems which organise the storage of data in a database in the most appropriate way

Contains data from a range of internal and external sources Query and reporting tools

facilitate management reporting and analysis

Software which looks for different (sometimes previously unknown) patterns in groups of data (eg retail companies can find customers with common interests)

Packages which aim to integrate all of an organisation's applications to give a single point of

Management information system (MIS)

A system to convert data from internal and external

sources into information and to communicate that

information, in an appropriate form, to managers at

all levels in all functions to enable them to make

timely and effective decisions for planning, directing

and controlling the activities for which they are

responsible Lucey

Essenfial characferisfics of an MIS

Definition of functions of individuals and their areas

of responsibility in achieving objectives

Consequences of a poor MIS

= Dissatisfaction among employees who believe they should be told more

= Lack of understanding of what targets for

= Definition of areas of contro! within the organisation achievement are

= Information required for an area of control should = Lack of information about how well work is being

flow to the manager responsible for it carried out

Page 41 4: Effect of information technology on modern management accounting

= When the output is required

= Sources of input information

Information for manufacturing and services

Management accounting systems Factors to consider when setting up a management accounting system (just one part of an overall MIS)

= Output required (identify the information needs of managers)

MIS and management

accounting systems

= Faster response means information must be produced

quickly and be up to date

Examples of impact of increasing compefition

= More competition requires better competitor intelligence Modelling systems

= Decision support systems

Examples of impact of increasing globalisation

= Increasing competition as above

of operating in different markets

= Behavioural impact on management accounting system

Influences on pricing policy

Price sensitivity of purchasers

Price perception

Quality connotations and ethics

Intermediaries’ objectives

Competitors and suppliers

Inflation and incomes

Porter's Five Forces model

This suggests pressure on price

from five forces

Page 45

External environmental factors and organisational strategy Pricing policy

BCG Portfolio Matrix The marx mustbe

managed so that an

High organisation's product

9 Star Question range is balanced Four

mark basic strategies can be

\ = Build

vow Cash cow Dog ¬-

—— ass

High Marketshare Low " Divest

Ansoff's growth vector rah

Threat of new entrants Options for growth

Threat of substitutes = Market penetration

Rivalry between existing competitors Bargaining power of buyers Bargaining power of suppliers

Inflation Is inflation driving up wage rates or being caused by pay settlements?

Legal Consider the impact of employment law or industry regulators

Political Is government policy affecting competition? Are incentives being offered to locate in a

particular area?

EU Think about product standards and labour costs

Cultural These can affect the motivation and satisfaction of employees, the adaptability of the

organisation and its image

Business

cycle Is the economy booming or in recession

When comparing performance across different countries, consider problems such as distance and remoteness

of divisions form HQ, transfer pricing difficulties, currency exchange rate fluctuations and variation in manage-

ment and worker skills

Types of organisation under government regulation

= Business Royal Mail operates on a

commercial basis

= Free atdelivery NHS

= Public good Armed forces

= Privatised utility Water firms are still a

monopoly

= Privatised utility British Telecom, Gas and

with competition Electricity

Government

regulation

Promote competition Purpose of regulations

Protect customer welfare Use private cash to enhance quality Reduce public spending Ensure government subsidies are well spent

: Impact of national fiscal and monetary policy on performance

Ethics and the organisation

Stakeholders and business

Groups or individuals whose

interests are directly affected by the

organisation's activities

Internal Employees,

management Connected Owners, suppliers,

customers, lenders External Government, local

Stakeholders’ interests are likely to conflict Stakeholder mapping helps the organisation to establish its priorities and set up its system

of corporate governance

Level of interest Low High Low

influence more powerful

stakeholders

: Treat with care; often passive but capable of moving to segment D;

Stakeholders Ethics and the Stakeholders and

organistion business performance

Ethics are ideas about right and wrong that set standards for conduct Ethics are important to business because

society considers such things important There are also rules of professional conduct to consider Ideas of right and

wrong have become more fluid and less absolute As a result there is a greater scrutiny of organisations’ behaviour

since it is likely to be less subject to definitive internal rules

The extent to which an organisation will exceed its Conflicting views of the organisation's responsibilities

minimum obligation to stakeholders.(Johnson & Scholes) create ethical dilemmas for managers at all levels

= Short term stakeholder interest: obey the letter of m Dealing with corrupt or unpleasant regimes

= Long term stakeholder interest: behave ethically to, Employees - cost or asset?

oats image and reduce pressure for regulation ultiple stakeholder obligations: the expectations = Corrupt payments to officials - extortion, bribery or , ne

of other groups of stakeholders may be considered, gift? The local culture must be considered

as well as any right they may have Corporate ethics

= Shaper of society: really restricted to public sector

organisations; businesses should not sacrifice their Has three contexts: interaction with society, effects of

commercial viability routine operations, behaviour of the individuals

Page 53 7: Other environmental and ethical issues

Stakeholders Ethics and the Stakeholders and

organistion business performance Employees and management Shareholders

Organisations should seek to align the interests of Shareholders often take a short-term view of their

their staff with those of the organisation involvement in an organisation

Consumer groups Suppliers

Consumerism reflects the increased importance Can influence the cost and quality of goods and

and power of consumers It appears in organised services

consumer groups and the recognition by producers

that consumer satisfaction is the key to long-term

Is an external stakeholder group Central

government sets the regulatory framework Local

government has devolved powers and local taxing

Accounting information needs

Management accounting information

Management accounting systems

This chapter introduces management accounting and information systems

Remember that we looked at strategic planning, management control and operational control information

in Chapter 1

A variety of topics are considered including the type of organisation and the objectives of management

accounting information You are likely to be asked to

discuss, define or evaluate aspects of a MIS

Accounfting Management Management

| [2/011039/0/ › 0| accounting information accounting systems

Management control

The process by which managers ensure that resources

are obtained and used effectively and efficiently in the

accomplishment of the organisation’s objectives It is

sometimes called tactics or tactical planning

Characteristics Short-term and non-strategic Management control planning activities include

preparing annual sales budget

= Management control activities include ensuring budget targets are (at least) reached

= Carried out in a series of routine and regular

planning and comparison procedures

= Management control information covers the whole organisation, is routinely collected/disseminated, is often quantitative and commonly expressed in money terms

- Cash flow forecasts

- Variance analysis reports

- Manning levels

= Source of information likely to be endogenous

(from within the organisation)

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Management control and strategic planning compared

The decision to launch a new brand of frozen foods is a strategic plan, but the choice of ingredients for the

meals is a management control decision

Conflict

Long-term strategic plans can conflict with the shorter-term objectives of management control

= Performance measures/control measures do not take strategic direction into account

= Strategic imperatives might not be properly communicated to middle management

= Strategic planning information might be difficult to measure

Page 57 8: Management accounting and information systems

Operational control/planning

The process of ensuring that specific

tasks are carried out effectively and

efficiently

Management control

V operational control

Operational control decisions are more

narrowly focused, carried out within a

shorter time frame and taken by

managers less senior in the

organisation

Operational control focuses on

individual tasks whereas management

control is concerned with the sum of all

tasks

Accounfing Management Management

U00 109/0): | accounting information accounting systems

Strategic plan Senior management decide sales should increase by 5% pa

for at least five years

Management control decision

Sales quotas are assigned to

each sales territory

Managers of sales territories

specify weekly targets for each

sales representative

Characteristics

" Short-term and non-strategic

Occurs in all aspects of an

organisation's activities and needed for day to day implementation of plans

= Often carried out at short

notice

= Information likely to have an endogenous source, to be detailed transaction data, quantitative and expressed in terms of units/hours

= Includes customer orders and cash receipts

Accounting Management Management

information needs | | Ele A Tey Tyan) = accounting systems

Good information What management accounting information helps managers to do

(its objectives)

= Relevant

= Complete = Measure profits and value stocks = Plan for the future

= Accurate = Control the business = Make decisions

tai ith confid Management accounting information is used for score keeping, problem

Sabie with conridence solving and attention directing

= Appropriately

communicated (to the

right person using the Features that characterise management accounting information in

= Manageable volume = Forward looking

= Cost effective = Financial, non-financial, quantitative or qualitative

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Accounting Management Management information needs accounting information | RET Tires Es Guts

Open and closed systems Impact of contingent factors

A closed system is isolated and shut off from the

environment, is unaffected by the environment and r = Technology

cannot influence the environment eg impact of AMT

An open system is connected to and interacts with Organisation structure

the environment and is influenced by it aa:

eg responsibility accounting systems The environment

Each manager should be given information eg new product launches require forecasting

according to what his or her responsibilities are, systems

and this is dictated by management structure

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Contingency approach

The contingency approach to management accounting is based on the premise that there is no universally

appropriate accounting system applicable to all organisations in all circumstances Efficient systems depend

on awareness of the environmental factors which influence their creation

Contingenf factor - the environment Contingenf factor - organisafion Contingent factor - technology

structure

= Predictability = Size Nature of production process

= Competition = Interdependence of parts Complexity of production

= Number of different product markets ]] ™ Degree of decentralisation process

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Accounting Management Management

information needs accounting information | RET Tires Es Guts

Responsibility accounting

Management accounting systems have to develop

ways of overcoming the problems of human

behaviour

= Allocating responsibility

= Encouraging participation in decision making

= Devising ways of measuring and rewarding

behaviour that contribute to organisational

objectives

Learn from managers of responsibility centres

what information they need, in what forms and what intervals

Design a system that enables this information to

be provided (using different responsibility centres

(cost, profit and so on))

Internal sources of information

External sources of information

9: Sources of management information

External information is vital for strategic planning and performance feedback but is rarely directly input into the management accounting system

Internal information provides the input data for the

management accounting system and is vital for

management control and operational control

eg inputting data to the MIS

Cost of inefficient use of information

eg information disseminated more widely

Payroll, production records, timesheets

Staff (collected formally or informally)

In today's competitive market, where the pace

of change in information systems and technology is rapid, organisations must be flexible enough to adapt to change quickly and must plan for expansion, growth and innovation within informafion systems

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