Ifac's Evolution Model of Management Accounting
Introduction
In 1989, the understanding of the scope and purposes of management accounting and the concepts which underpinned it was summarized by the International Federation of Accountants (IFAC) in a statement. Later on in 1998, the statement was revised and released as Management Accounting Concepts – Number 1 in the series of International Management Accounting Practice Statements.
The purpose of this article is to explain the IFAC’s perspective of the change in management accounting. This can be justified by the author when he surveyed the stages of evolution of the management accounting practices in the food and drinks companies in United Kingdom and used it to further develop and apply the IFAC-based model.
Since the 1980’s Kaplan review, there has been a lot of creative management accounting techniques that have been developed across a range of industries and from there, publicized internationally. These techniques have been designed to support the latest technologies and management processes. Besides that, there are companies which try to meet the challenge of global competition by searching for a competitive advantage. However, these new techniques have received a number of criticisms. One of those criticisms is that these new techniques have influenced the whole process of management accounting (planning, controlling, decision-making, and communication). It has also shifted its focus from a basic and easy role of determining cost and controlling the financial parts into something more sophisticated that creates value through upgraded deployment of resources.
Furthermore, it is still questionable whether the word ‘evolution’, with its implication of progress is an appropriate description for the word ‘change’. However, the purpose of this article is not to answer those questions but to acknowledge that IFAC has a strong claim to formally ‘speak for’ management accounting. Its framework is also useful for certain studies.
Even though the IFAC (1998)
In 1989, the understanding of the scope and purposes of management accounting and the concepts which underpinned it was summarized by the International Federation of Accountants (IFAC) in a statement. Later on in 1998, the statement was revised and released as Management Accounting Concepts – Number 1 in the series of International Management Accounting Practice Statements.
The purpose of this article is to explain the IFAC’s perspective of the change in management accounting. This can be justified by the author when he surveyed the stages of evolution of the management accounting practices in the food and drinks companies in United Kingdom and used it to further develop and apply the IFAC-based model.
Since the 1980’s Kaplan review, there has been a lot of creative management accounting techniques that have been developed across a range of industries and from there, publicized internationally. These techniques have been designed to support the latest technologies and management processes. Besides that, there are companies which try to meet the challenge of global competition by searching for a competitive advantage. However, these new techniques have received a number of criticisms. One of those criticisms is that these new techniques have influenced the whole process of management accounting (planning, controlling, decision-making, and communication). It has also shifted its focus from a basic and easy role of determining cost and controlling the financial parts into something more sophisticated that creates value through upgraded deployment of resources.
Furthermore, it is still questionable whether the word ‘evolution’, with its implication of progress is an appropriate description for the word ‘change’. However, the purpose of this article is not to answer those questions but to acknowledge that IFAC has a strong claim to formally ‘speak for’ management accounting. Its framework is also useful for certain studies.
Even though the IFAC (1998)
References: 1. Kaplan, R. S., (1984). The Evolution of Management Accounting. The Accounting Review, Vol. 59, No. 3, pp. 390-418 Key words 1. IFAC: An organization of national accounting associations and other groups interested in accounting matters. 2. Management Accounting Evolution: The development of managerial control practices and assesses their relevance to the changing nature of organizations. 3. Research note: A statement from a brokerage firm or other investment advisory service discussing a specific security, industry, market or news item.