Anna Bondareva Victor Gaag Anastasya Naskidaeva. Content Management Accounting for International...
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Transcript of Anna Bondareva Victor Gaag Anastasya Naskidaeva. Content Management Accounting for International...
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Anna Bondareva
Victor GaagAnastasya Naskidaeva
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Management Accounting for International companies
Professor Igor N. Baranov 2
Variants of rolling budget (RB)Definitions of RBWhy do managers need RB?RB vs. Traditional budget (“+” and “-”)Guidelines for successful implementation of
RBConclusion
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Variants of budgetingRolling budget
Revised while with
permanent being implemented horizon of
planning
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Management Accounting for International companies
Professor Igor N. Baranov
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Variants of budgeting
Management Accounting for International companies
Professor Igor N. Baranov 4
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Rolling (continuous) budget:
A budget continuously updated by adding a further accounting period (month or quarter) when the earliest accounting period has expired. Its use is particularly beneficial where future costs and/or activities can not be forecast accurately
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Management Accounting for International companies
Professor Igor N. Baranov
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Why do managers need RB?
ControlRevision Reassessment of competitive factorsForecast
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Better financialresults
Management Accounting for International companies
Professor Igor N. Baranov
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RB vs. Traditional (Advantages of RB)
Encourage managers to assess, think strategically year-round rather than just once a year at budget time
Managers have a full year’s budget always available and the rolling budget forces them to continue plan ahead
“A static budget simply doesn’t reflect the pace of business today,” says Jill Langerman, CPA, president and CFO of the accounting firm Fair, Anderson & Langerman in Las Vegas
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Management Accounting for International companies
Professor Igor N. Baranov
![Page 8: Anna Bondareva Victor Gaag Anastasya Naskidaeva. Content Management Accounting for International companies Professor Igor N. Baranov 2 Variants of rolling.](https://reader038.fdocuments.us/reader038/viewer/2022110400/56649dd05503460f94ac4b28/html5/thumbnails/8.jpg)
RB vs. Traditional (Disadvantages of RB)Takes too much time & effort Can create uncertainty for managers as the
budget is constantly being changed
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Management Accounting for International companies
Professor Igor N. Baranov
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Why do companies failure while implementing RB?
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Management Accounting for International companies
Professor Igor N. Baranov
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They use RB
Management Accounting for International companies
Professor Igor N. Baranov 10
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Management Accounting for International companies
Professor Igor N. Baranov 11
Practical Example #1Volvo relies on several types of rolling forecasts:every month a «flash» forecast that looks 3 months
ahead: informs managers about current demandevery quarter - a 12-month forecast: updates managers’
assumptions about customer behavior & economic trendsevery year - 2 additional forecasts
1) looking 4 years ahead
2) looking 10 years ahead
access the company’s market positioning & determine schedules for phasing out old models & phasing in new ones.
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Management Accounting for International companies
Professor Igor N. Baranov 12
Practical Example #2Cicso- a producer of ¾ of the world’s computer
networking equipmenta hybrid of traditional & rolling budgetsan annual plan which remains fixed for a yearBut each quarter it is reviewed against actual
performance & adjusted for the remainder of the year.
Besides they produce rolling 12-month financial forecasts on a monthly basis, incorporating numerous «what-if» scenarious into its calculations.
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Guidelines for successful implementation of RB:
1. Firstly, a firm needs to ensure that the overall volume of information required is reasonable. Too many details can lead to misunderstanding and moving into wrong direction
2. Secondly, senior managers as well as line managers need to be actively involved
3. Thirdly, re-forecasts and re-budgets must be based on a thorough analysis of the changes in operating variables and marketplace
4. Fourthly, adoption of RB must not reinforce the concentration on financial measures and result in the exclusion of other critical operating measures
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Management Accounting for International companies
Professor Igor N. Baranov
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Management Accounting for International companies
Professor Igor N. Baranov 14
The concept of rolling budget states that budgeting is a continuous process,
but not something that takes place once a year than a budget is drawn up
Therefore sound managers are encouraged to constantly look ahead revising and reassessing a company’s future projections several times a year.
“A static budget simply doesn’t reflect the pace of business today,” says Jill Langerman, CPA, president and CFO of the accounting firm Fair, Anderson & Langerman in Las Vegas.
Conclusion
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Management Accounting for International companies
Professor Igor N. Baranov