Friday, January 3, 2020

Strategic Management Accounting - 1773 Words

STRATEGIC MANAGEMENT ACCOUNTING This report will attempt to explain what Strategic Management Accounting (SMA) is, how it developed, why Traditional Management Accounting (TMA) is not sufficient to provide information for strategic decisions and the difference between SMA and TMA. It will further outline some of the essential analytical tools or techniques in SMA such as Activity Based Costing (ABC) and the Balanced Scorecard (BSC). SMA is an extremely broad concept, so in order to give a bird’s eye view of the subject this report mainly focus on comparing SMA to TMA and finally describes the importance and criticisms of SMA. What is Strategic Management Accounting? â€Å"A form of management accounting in which emphasis is placed on†¦show more content†¦Bromwich, (1990) contends that SMA enables the management to have a bird’s eye view of the competitors’ procedure and business techniques business and to take decisions accordingly. In this way a major hallmark of SMA is its inclusion of non-financial aspects for the purpose of decision making. Lords (1996) identifies the following functions which are commonly associated with SMA: 1. Collecting information related to the competitors. 2. Using accounting for strategic decisions. 3. Cutting costs on the basis of strategic decisions. 4. And, gaining competitive advantage through it. Wilson and Chua (1993) tabulate ten key differences between MA and SMA as following: | Traditional MA | Strategic MA | 1 | Historical | Prospective | 2 | Single entity | Relative | 3 | Introspective | Out-ward looking | 4 | Manufacturing focus | Competitive focus | 5 | Existing activities | Possibilities | 6 | Reactive | Proactive | 7 | Programmed | Un-programmed | 8 | Data orientation | Information oriented | 9 | Based on existing systems | Unconstrained by existing systems | 10 | Built on conventions | Ignores conventions | Critics have regularly complained that TMA focuses too much on internal business functions of accounting in order to meet the requirements of the internal managers. Some argues that while special attention is given to the internal affairs of the business sight is lost of the externalShow MoreRelatedStrategic Management Accounting13457 Words   |  54 Pagesof this journal is available at AAAJ 21,2 Strategic management accounting: how far have we come in 25 years? 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