Trends in Management Accounting

The Institute of Management Accountants (IMA) has a series of YouTube Videos on Trends in Management Accounting. We will continue to review and discuss some of these trends to learn about developments in this field for discussions in this course.

Listen to the following two videos in the IMA series:

Required:

Comment and expand on a topic discussed in the video and provide a real world example from the news or your own experience. In addition, make some concluding remarks about the seven changes discussed in this series.

Presence during both weeks of the module and a minimum of three postings are expected, one original posting and two responses to colleagues. Minimum required participation does not guarantee a perfect score.

Response #1

Trends in Management Accounting

Contains unread posts

posted Aug 28, 2018 1:29 PM

Enhancing customer experiences requires optimization of performance into the digital back-office functions that are handled by shared services companies. The use of management accounting internal chargeback to provide services for internal users would help in the creation of a market pricing. The use of information technology by the management and the shared services would help in cost minimization. People tend to consume much of the products offered for free in restaurant or hotels without caring about the cost of the item (Accountants, 2014).

The last trend entails the need to improve competency and skills to align with behavioral cost management. Many organizations performance has stagnated or declined due to the failure of management accepting the challenge of tackling new ideas aimed at improving the company performance (Accountants, 2014). Therefore, there is a need to change the capabilities and skills of management accountants.

The seven trends in management accounting provide what organizations need to do to implement the changes necessary which suit their company problems. An organization may not accommodate all the trends but some of them may help in improving its performance. Knowing the type of customers promote growth while expanding the role of the organization into an enterprise performance management greatly enhance integration. Accepting change into the new method of decision support through managerial economics, the use of information technology for shared values and also the use of business analytics would help in improving the skills and competency of the managerial accountants.

References

Accountants, I. o. (2014, April). Managing Information Technology And Shared Services As A Business. Retrieved from

Accountants, I. o. (2014, April). The Need For Better Skills and Competency With Behavioral Cost Management. Retrieved from

Response #2

Internal Chargebacks in the Current Economy

Contains unread posts

posted Aug 28, 2018 9:31 PM

Nothing can capture my interest the same way that internal chargebacks do. The reason I feel this is so important is because it’s designed to creates fairness in a shared services business group. I’ll start first with a personal example. An individual I work with is hired to provide long-term forecasting expertise for a business group that is the majority of his responsibility. They account for about 75% of his personnel he forecasts for. Aside from this, he is responsible for another two smaller groups – that in their eyes – consider themselves just as important as the larger group. Because this big group that he works for knows that he’s “there for them,” he’s often tasked with continually creating additional views based on the whim of requests from their organization. When all the actual results are in, he probably spends 95% of his time completing requests that don’t really add business value (from the large group), but are purely for convenience sake. Ultimately, the smaller groups are over shadowed time and time again based on the requests that always come his way.

Internal Chargebacks are a system created to create fairness to the internal organization, where fairness can sometimes be defined as usage (Herman, 1997). In the sense of the above scenario, I imagine that the larger business group might reconsider how many requests are sent to this individual based on the usage of him. Herman (1997) points out that sometimes usage can be hard to keep track of, due to the man hours and CPU needs for recording this sort of usage. In other cases, some businesses try and average usage costs out based on individuals. However, I imagine that some sort of request times might be overlooked in this structure. Whether shared service groups use the usage method, or the average for total prices, I think we can certainly agree that internal chargebacks are an important aspect of any sustainable business model.

Reference

Herman, J. (1997). Internal chargeback: Keep it simple, but not too simple. Business Communications Review, 27(4), 24.

Response #3 Will be posted when someone else post one in the class

Module 3 – Background

TRANSFER PRICING AND RESPONSIBILITY CENTERS

Modular Learning Objectives

Keep the following objectives in mind as you work through the material in this module:

Define the role of responsibility accounting.
Differentiate between controllable and uncontrollable costs.
Analyze structure of a decentralized organization.
Define profit centers, cost centers, and investment centers.
Compute transfer prices.
Identify three main transfer pricing approaches.

Required Reading

This module covers the role of responsibility accounting and responsibility centers. Explore these topics further while keeping the above six objectives in mind. Click on the three arrows to explore each topic in more detail:

Check Your Understanding

Check your understanding to make sure that you have a good grasp of the background material. If you are not comfortable with the concepts, review some of the material again or go to the optional resource for more examples.

Click on the quiz icon for an ungraded, 20-question true-or-false self-study quiz to check your progress. If you are not satisfied with the score, review some of the material again. For more in-depth information, review materials listed under optional reading at the bottom of this page.

Final Thoughts

A responsibility center is a part or subunit of a company for which a manager has authority and responsibility. The company’s detailed organization chart is a logical source for determining responsibility centers. The most common responsibility centers are the departments within a company.
When the manager of a responsibility center can control only costs, the responsibility center is referred to as a cost center. If a manager can control both costs and revenues, the responsibility center is known as a profit center. If a manager has authority and responsibility for costs, revenues, and investments the responsibility center is referred to as an investment center.

The existence of responsibility centers necessitates the setting of an internal price for the transfer of parts, goods, and services among units and responsibility centers. Transfer prices are contentious because management intervenes by creating policies which have an effect on the income of a responsibility center or unit.

Transfers among international jurisdictions involve additional considerations. Not only accounting rules, but income taxation and duties affect pricing strategies. Most countries have regulations to help prevent the use of this pricing method as a means of evading taxes or similar unethical and illegal activities.

Optional Reading

For further detail refer to Dr. Walther’s accounting text and videos.

Walther, L. (2017). Chapter 23: Reporting to Support Managerial Decisions.

Discussion Question and 3 Responses

Trends in Management Accounting

Trends in Management Accounting

References

Internal Chargebacks in the Current Economy

Module 3 – Background