PAS 3173

ADVANCE MANAGEMENT
ACCOUNTING
ROSMAWATI MAHFAR

INTRODUCTION

ROSMAWATI BT MAHFAR
What are we going to LEARN?
• INTRODUCTION: MODERN BUSINESS ENVIRONMENT
AND MA
• EVOLUTION OF MANAGEMENT ACCOUNTING
• STRATEGIC MANAGEMENT ACCOUNTING
• TRANSFER PRICING FOR DECENTRALISED
ORGANISATION
• PERFORMANCE MEASURES FOR BUSINESS UNIT
PERFORMANCE: PART 1
PERFORMANCE MEASURES PART 2: BALANCED SCORE
CARD
• MOTIVATIONAL, BEHAVIOURAL AND ETHICAL ISSUES
IN PLANNING, CONTROL AND D-MAKING
• RECENT DEVELOPMENT IN MANAGEMENT
ACCOUNTING (Current articles related to management
accounting issues)
Slide 2
 LECTURE 1

Modern Business
Environment and
Management Accounting
Rosmawati Mahfar
 Modern Business Environment
World Merchandise Trade Volume By Major Product Group,
1950-2009 (Volume Indices, 1950=100)
Log. scale

10000

5000

2500
Manufactures

1000
Fuels and mining
products
500

Agricultural
products
250

100
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
Source: World Trade Organization, International Trade Statistic 2010 Slide 4
Modern Business Environment
Regional Shares In World Merchandise Exports, 2009
% 2009
45

40

35

30

25

20

15

10

0
North America South and Central Europe Commonwealth of Africa Middle East Asia
America Independent States
(CIS)

Source: World Trade Organization, International Trade Statistic 2010

Slide 5
The changing of business environment
makes MA become very important
1. Organizations have faced dramatic changes in their business
environment.
 Move from protected markets to highly competitive global
markets
 Decentralisation and Deregulation
 Declining product life-cycles

2. To compete successfully in today’s environment companies

are:
 Making customer satisfaction an overriding priority.
 Adopting new management approaches.
 Changing their manufacturing systems.

3. Above changes are having a significant impact on the MAS.

Slide 6
Learning Objective 1

Adopting the new

management
approaches

Slide 7
 Process Management
A business
process is a series of
steps that are followed in order to
carry out some task in
a business.

Product Customer
R&D Design Manufacturing Marketing Distribution Service

Business functions making up the value chain

Slide 8
NO more Traditional “Push”
Manufacturing Company

Forecast Sales Order components Store Inventory

Make Sales from

Finished Goods Store Produce goods in
Inventory Inventory anticipation of Sales

Garrison, Noreen, Brewer, Cheng & Yuen

Slide 9
YES to New approach : Lean Production
The five step process results in a “pull” manufacturing system
that reduces inventories, decreases defects, reduces
wasted effort, and shortens customer response times.

Customer places Create Production Generate component

an order Order requirements

Goods delivered Production begins Components

when needed as parts arrive are ordered
Slide 10
Learning Objective 2
Changing the
manufacturing systems for
cost reduction programs.
The basic concepts of Lean
Production, the Theory of
Constraints and Six Sigma.

Slide 11
 There are three approaches to
improving business processes . . .
Theory of
Constraints (TOC)
 Lean  Six
Production Sigma

Slide 12
 1- Lean Production : The New
Inventory Management
Lean thinking can be used to improve business
processes that link companies together.

The term supply chain management refers to the

coordination of business processes across
companies to better serve end consumers.
Slide 13
Lean Production
 Identify value  Identify the
in specific business process
products/services. that delivers value.

The lean thinking  Organize work

arrangements around
model is a five
the flow of the
step approach. business process.

 Continuously pursue  Create a pull

perfection in the system that responds
business process. to customer orders.
Slide 14
2-Theory of Constraints
A constraint (also called a bottleneck) is anything that
prevents you from getting more of what you want.
The Theory of Constraints is based on the observation that
effectively managing the constraint is the key to success.

The constraint in a system is determined

by the step that has the smallest capacity.

Slide 15
 Theory of Constraints
Only actions 2. Allow the
that strengthen weakest link to
the weakest link set the tempo.
in the “chain”
improve the
process.
3. Focus on
1. Identify the improving
weakest link. the weakest
link.

4. Recognize that
the weakest link
is no longer so.
Slide 16
 3-Six Sigma
A process improvement method relying on customer
feedback and fact-based data gathering and analysis
techniques to drive process improvement.

Refers to a process that Sometimes

generates no more associated
than 3.4 defects per million with the term zero
opportunities. defects.

Slide 17
Six Sigma
The Six Sigma DMAIC Framework
Stage Goals
Define ● Establish the scope and purpose of the project.
● Diagram the flow of the current process.
● Establish the customer's requirements for the
process.
Measure ● Gather baseline performance data related to
the existing process.
● Narrow the scope of the project to the most
important problems.
Analyze ● Identify the root cause(s) of the problems
identified in the Measure stage.
Improve ● Develop, evaluate, and implement solutions
to the problems.
Control ● Ensure that problems remain fixed.
● Seek
Garrison, Noreen, toCheng
Brewer, improve
& Yuenthe new methods over time.
Slide 18
Learning Objective 4
Understand the
importance of upholding
ethical standards.

Slide 19
Sustainability Reporting
International Federation of Accountants (IFAC) Sustainability
Framework
•Organizations should
o achieve a “Triple Bottom-Line”
financial, social, and environmental goals
(or 3Ps: Profit, People, and Planet)
promote a sound corporate governance and ethical
responsibility to ensure financial success through
ethical operations and transactions;
promote cultural diversity and equality;
provide opportunities for social and economic development of
the communities; and
minimize environmental damages, and provide a safe
working and living environment for the communities.

Slide 20
Why Have Ethical Standards?
Ethical standards in business are essential for a
smooth functioning economy.

Without ethical standards in business, the

economy, and all of us who depend on it for
jobs, goods, and services, would suffer.

Abandoning ethical standards in business would

lead to a lower quality of life with less
desirable goods and services at higher prices.
Slide 21
 Professional Qualification of
Management Accountants
• Traditional accounting qualifications e.g. Chartered Accountants (ACA), Certified
Public Accountants (CPA) and Chartered Certified Accountants (ACCA)
• Management accountants qualifications, e.g.:
Institution Abbrev Country Qualification
The Institute of Management Accountants IMA US CMA
Certified Management Accountants of Canada CMA Canada CMA
(previously known as The Society of Management Accountants of Canada) Canada
The Chartered Institute of Management Accountants CIMA UK FCMA , ACMA
The Institute of Certified Management Accountants of ICMA Australia CMA
Australia
- CMA Philippines Philippines CMA
- CMA Indonesia Indonesia CMA
- CMA Sri Lanka Sri Lanka CMA
- CMA India India CMA
The Institute of Cost and Works Accountants of India ICWAI India FICWA, AICWA
Slide 22