Strategic Management Accounting

Essay by JulzTerrillUniversity, Bachelor'sA, August 2014

download word file, 5 pages 0.0

Downloaded 1 times



Advanced Management Accounting

Assessment One

Julia Terrill


Word Count: 1 134

The role of Management Accounting (MA) has experienced a significant shift in focus since the 1980's. Prior to this a strong backward focus with no strategic component led to MA being perceived as insignificant and unnecessary, focusing very much on cost accounting methods (Eldenburg et al, 2010, p487). However since the 1980's increased globalisation and a strong focus on social and economic factors within organisations led to the creation of Strategic Management Accounting (SMA), where the focus has become forward looking, toward the strategy of an organisation and the strategic controls that will move an organisation toward their strategy. With the implementation of SMA came the development of frameworks such as Ferreira and Otley's Performance Management System Framework (PMSF) and Kaplan and Norton's Strategy Map Framework (SMF). These frameworks help MA identify and communicate with the organisation the links between the strategy and the processes and systems the organisation uses to move toward their strategy.

The use of these frameworks assist MA both support and influence decision making within organisations.

SMA begins with the strategy of an organisation. The strategy provides a future direction and guidance for managers. An organisations strategy involves multiple components such as a measurable goal, a means of reaching the goal, a time frame and consideration of the response of industry competitors. A strategy is not a concrete plan but is fluid and dynamic and reacts to the environment of the business. A business strategy must be aware of both internal and external factors and be able to adjust as needed. Kaplan, R. and Norton, D. state an organisations strategy "describes how it intends to create value for its shareholders, customers and citizens." (p4, 2004) Strategy is commonly broken down...