Saturday, March 10, 2012

Strategic Management Accounting

Accounting Information for Management


Management accounting must have been named as Accounting Information for Management. In this function, accountants have to understand the information needs of managers for particular decisions and provide that information by accessing the accounting system of the company.


Companies must have a section of ‘Accounting Information for Management” in the accounts departments. Typically an accounts department may have a Financial Accounting Section, Financial Statements and Corporate Taxes Section, Indirect Taxes Section, Cost Accounting Section and Accounting Information for Management Section.


In the “Accounting information of management” section there can be persons specializing in production management information, marketing management information, and strategic management information etc.


Strategic Management Accounting


Simmonds (1981) defined strategic management accounting as ‘the provision and analysis of management accounting data about a business and its competitors for use in developing and monitoring business strategy.’ My personal preference would be for a focus on accessing the financial accounting system and cost accounting system and required analysis for providing information useful in developing monitoring business strategy. There may be a need for separate management accounting system that collects data which is not collected in the financial or cost accounting systems. But at the moment, adequate work is being done at the level of accounting information for management decisions.


Simmonds argued for a change in orientation of accounting professional to develop strategic management accounting. The approach to be followed in management accounting is information orientation and not accounting document orientation. Information orientation starts with the diagnosis of problems, developing various alternative solutions, methodology for decision making or for selection of the best alternative. Accounting data and information may be required or are required in developing solutions and selecting the best solution. Based on the information required accountant have to provide the needed accounting information and for this purpose they may build or develop accounting data systems.


Accountants can access or figure out competitor’s accounting information and cost information from publicly available statements or specially compiled statements. Publicly available information can be financial statements and other statements filed with regulatory agencies. Specially compiled statements can be consolidated information shared by benchmarking societies, industry level information reports etc. By using these sources, strategic management accounting section can provide competitor accounting information to the strategic management function.


Information of Interest in Strategic Management


The accounting information issues of interest in strategic management are relative levels and trends in real costs and prices, volume, market share, cash flow, and the proportion of the enterprise’s total resources devoted to a product group. For each of the issues a comparison with competitors is also required. 


Time series information is required on accounting items that have a strategic importance. For example is experience curve is an important strategic concept. It predicts that as cumulative production is increasing real costs per unit come down. So monitoring real cost per unit in every period is an accounting function of importance from strategy perspective.


Thus certain standard information requirements can be identified for supporting strategic management and then the accounting information section must support ad hoc information needs of strategic managers. 





Simmonds K, (1981), ‘Strategic Management Accounting’, Management Accounting, Vol. 59, No. 4, pp. 26-29.


Simmonds K, (1986), ‘The Accounting Assessment of Competitive Position’, European Journal of Marketing, Vol. 20, No. 1, pp. 16-21.


 Web References


Cinquini, Lino and Tenucci, Andréa, Exploring the Relationship between Strategy and Strategic Management Accounting Techniques (May 24, 2006).

Available at SSRN:


Cinquini, Lino and Tenucci, Andréa, Is the Adoption of Strategic Management Accounting Techniques Really 'Strategy-Driven'? Evidence from a Survey (June 15, 2007).

Available at SSRN:


Vieira, Rui J. O. and Hoskin, Keith, Management Accounting Practices and Discourses Change: The Role and Use of Management Accounting Systems (2006). FEUNL Working Paper No. 481




Knol No. 58

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