Transcript Chapter 1 Introduction to Cost and Management Accounting in a Global Business Environment

Cost Accounting
Traditions and Innovations
Barfield, Raiborn, Kinney
Chapter 1
Introduction to Cost and Management
Accounting in a Global Business
Environment
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
The
Language
of
Business
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
Management
• Meet external
information needs
• Comply with GAAP
• Meet internal
information needs
• Provide product
costing information
Financial Accounting Should
Provide information to
stockholders, creditors, and
various regulatory bodies
Comply with GAAP
Management Accounting Should
Provide product costing information
for external financial statements
Provide information
useful for
making decisions
and controlling
operations
Accounting Differences
Financial
Managerial
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External
Aggregated
Historical
Quantitative
Monetary
Verifiable
GAAP
Internal
Segmented
Current/Forecasted
Quantitative/Qualitative
Monetary/Nonmonetary
Timely/Reasonable estimate
Benefits exceed costs
Relationship of Financial,
Management, and Cost
Accounting
FINANCIAL
ACCOUNTING
COST
MANAGEMENT
ACCOUNTING ACCOUNTING
Accounting Standards
Financial
Management
• Financial Accounting
Standards Board
(FASB)
• Private-sector body
• Cost Accounting
Standards Board
(CASB)
• Public-sector board
Accounting Organizations
Institute 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
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Competence
Confidentiality
Integrity
Objectivity
Competence
Confidentiality
Integrity
Objectivity
Global Business Environment
International trade of goods
and services
International movement of
labor
International flows of
capital and information
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)
North American Free Trade
Agreement (NAFTA)
Members agreed
to allow duty-free
transfer of goods
under certain
conditions
General Agreement on
Tariffs and Trade (GATT)
To provide a “level playing field” for
trade among the 100+ signatory nations
Global Business Environment
Risks
• Strategic
– Environment and Organization
• Operating
• Financial
• Information
Global Business Environment
Ethical Considerations
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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.
Goals and
Objectives
Strategic
Planning
Tactical
Planning
Organizational
Strategy
Organizational Strategy
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Organizational Structure
Core Competencies
Organizational Constraints
Organizational Culture
Environmental Constraints
Organizational Strategy
• Organizational Structure
Centralization
Decentralization
Organizational Strategy
• Organizational Structure
• Core Competencies
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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
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Organizational Structure
Core Competencies
Organizational Constraints
Organizational Culture
– An organization’s norms
• internal and external
• formal and informal
Organizational Strategy
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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
Formal process for gathering and analyzing
information and producing intelligence to
meet decision-making needs
• Information about internal processes
• Knowledge of markets, technologies,
and competitors
Business Intelligence
Competitive Intelligence
Competitor
Analysis
Levels of Intelligence Gathering
Business Segments
• Segment Mission relates to Product Life
Cycle
– Build
– Hold
– Harvest
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
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make strategic decisions
measure and evaluate management
provide appropriate incentives
provide information about the value chain
Questions
• What is the relationship among cost,
financial, and management accounting?
• How do ethics guide workforce behavior?
• What is the impact of the accounting
function on achievement of strategic goals
and objectives?