Post on 22-Dec-2015
Chapter 1
Introduction to Cost and Management Accounting in a Global Business
Environment
Cost AccountingTraditions and Innovations
Barfield, Raiborn, Kinney
Learning Objectives (1 of 3)
• Explain the relationship between financial and management accounting
• Describe the relationships among cost, financial, and management accounting
• Describe the role of ethics in guiding workforce behavior
• Identify the factors that influence the globalization of business
Learning Objectives (2 of 3)
• List the primary factors and constraints that influence an organization’s strategy
• Explain the impact of the competitive environment on an organization’s strategy
• Clarify the impact of the accounting function on achievement of strategic goals and objectives
Learning Objectives (3 of 3)
• Explain the effect of the product life cycle on the company segment’s mission
• Describe the importance of the value chain
Accounting• Provides information to external parties
– Stockholders, creditors, regulators
• Estimates the cost of products produced and services provided
• Provides information to internal decision makers– To plan, control, and evaluate performance
Two Types of Accounting
Financial• Meet external
information needs• Comply with GAAP
Management• Meet internal
information needs• Provide product
costing information
Financial Accounting Should
Provide information tostockholders, creditors, andvarious regulatory bodies
Comply with GAAP
Management Accounting Should
Provide informationuseful for
making decisionsand controlling
operations
Provide product costing informationfor external financial statements
Accounting Differences
Financial• External• Aggregated• Historical• Quantitative• Monetary• Verifiable• GAAP
Managerial• Internal• Segmented• Current/Forecasted• Quantitative/Qualitative• Monetary/Nonmonetary• Timely/Reasonable estimate• Benefits exceed costs
Relationship of Financial, Management, and Cost
Accounting
FINANCIALACCOUNTING
MANAGEMENTACCOUNTING
COSTACCOUNTING
Accounting Standards
Financial• Financial Accounting
Standards Board (FASB)
• Private-sector body
Management• Cost Accounting
Standards Board (CASB)
• Public-sector board
Accounting OrganizationsInstitute of Management
Accountants (IMA)• Statements on Management
Accounting (not legally binding)
• Certified Management Accountant (CMA)
• Certified in Financial Management (CFM)
Society of Management Accountants of Canada
• Management Accounting Guidelines (not legally binding)
Ethics & Management Accountants
• Standards of Ethical Conduct for Management Accountants– Competence– Confidentiality– Integrity– Objectivity
CompetenceConfidentialityIntegrityObjectivity
International trade of goods and servicesInternational movement of laborInternational flows of capital and information
Global Business Environment
Global Business Challenges
• Understand the factors influencing international business markets
• Devise a long-term plan to achieve organizational goals
• Develop information systems that keep the company’s operations consistent with its plans and goals
Global Business Environment
• Electronic Commerce
• Trade Agreements– North American Free Trade Agreement
(NAFTA)– General Agreement on Tariffs and Trade
(GATT)
Members agreed to allow duty-free transfer of goods
under certain conditions
North American Free Trade Agreement (NAFTA)
General Agreement on Tariffs and Trade (GATT)
To provide a “level playing field” fortrade among the 100+ signatory nations
Global Business Environment
Risks
• Strategic– Environment and Organization
• Operating
• Financial
• Information
Ethical Considerations– Is it legal?– Does it comply with our values?– How will it look in the newspaper?– If you do it, will you feel bad?
– If it’s wrong, don’t do it.– If you’re not sure, ask.
Global Business Environment
Organizational Strategy
• Organizational Structure
• Core Competencies
• Organizational Constraints
• Organizational Culture
• Environmental Constraints
Organizational Strategy
• Organizational Structure
• Core Competencies– A higher proficiency than the competitors– Technological innovation– Engineering– Product development– After-sale service
Organizational Strategy
• Organizational Structure
• Core Competencies
• Organizational Constraints– Monetary Capital– Intellectual Capital
• Human Capital• Structural Capital• Relationship Capital
Organizational Strategy
• Organizational Structure
• Core Competencies
• Organizational Constraints
• Organizational Culture– An organization’s norms
• internal and external• formal and informal
Organizational Strategy• Organizational Structure
• Core Competencies
• Organizational Constraints
• Organizational Culture
• Environmental Constraints– Limitations on strategy caused by external
differences in culture, competitive market structures, fiscal policy, laws, or political situations
Business Intelligence System
• Information about internal processes
• Knowledge of markets, technologies, and competitors
Formal process for gathering and analyzing information and producing intelligence to
meet decision-making needs
Accounting Information• Strategic Resource Management
– Planning for deployment of resources to create value for customers and shareholders
• Value Chain—Foundation of SRM– Set of processes that convert inputs into products and
services
Use accounting information to evaluate the value chain to improve strategic resource management
The Accountant’s Role
• Accountants provide information that is used to– make strategic decisions– measure and evaluate management– provide appropriate incentives– provide information about the value chain