Managerial Accounting 3 responsibilities of decision making Planning Setting goals and objectives Budget Directing Overseeing day to day operations Controlling Evaluating results of operations Controlling Evaluating results of operations against plans and making adjustments as needed Budget versus actual Examples o Comparing budgeted sales with actual sales to take corrective actions o Comparing budgeted product costs against actual product costs to take corrective actions Managerial vs Financial Issue Primary users Purpose of information Primary accounting product What s included Underlying basis of information Emphasis Business Unit Preparation Verification Information requirements Managerial Internal Plan direct control decide Internal reports useful to management Defined by management Internal and External transactions focus on future Data must be relevant Segments of the business Depends on Management needs Internal audit None Careful consideration Financial External Users make investing and lending decisions General purpose financial statements Determined by GAAP Based on historical transactions with external parties Data must be reliable and objective Company as a whole Annually and quarterly External audit SEC requires publically traded companies to issue audited financial statements N A Impact on employee behavior Exampe E1 10A 1 Current Shareholders F 2 Wall street analyst F 3 News Reporter F 4 Company Controller Both 5 Board of Directors Both 6 FCC Financial 7 External Auditor F 8 Internal Auditor B 9 Potential Shareholder F 10 Loan Officer F 11 Manger of Sales M 12 Bookkeeping F 13 Regional Managers M 14 IRS F Board audit committee CEO COO and CFO COO VP of operations CFO Treasurer controller Internal audit audit committee Cross Functional Teams Changing Roles of Management Accountants Impact of technology Ensuring accurate financial records Planning analyzing and interpreting account data Providing decision support Required Skills of Managerial accountants Knowledge of Financial and Managerial accounting Analytical Skills critical thinking Knowledge of how a business functions Ability to work on a team Oral and written communication skills E1 9A 1 Financial Accounting 2 Shareholders and Creditors 3 Controlling 4 Managers 5 FA 6 MA 7 Planning 8 MA 9 FA 1 COO and CFO 2 Audit committee and CEO 3 Controllers 4 Board of Directors 5 Treasurer 6 COO 7 Cross functional teams 8 Audit Committee E1 11A Institute of Management Accountants IMA Professional association for management accountants Function o Certification CMA o Practice development o Education o Networking o Ethical standards o Public education Homework and 2 Quizzes due this Sunday 1 26 14 11 59 PM Attendance quiz will not appear until Thursday Chapter 1 Ethics Page 12 Competences o Expertise Knowledge Skills Qualifications to perform Job duties o Maintaining your skills o Performing your job duties in accordance s with laws regulations and technical standards o Providing decision support that is accurate o Abstaining from engaging in or supporting any activity that would Confidentiality Keep quiet Integrity discredit the profession o Reporting conflicts of interests o Violations Cheating on an expense report discussed in class Accepting gifts or favors that could be perceived to influence Stealing supplies from your company Credibility your actions o Communicating information fairly and objectively o Is your work creditable Ethical Behavior Doing the right thing regardless of the consequences Examples of unethical behavior o Allowing reimbursement of false expense reports o Manipulating income o Performing task not qualified to perform Steps to Resolve o Follow companies policies o If not resolved Discuss with immediate supervisor Discuss with objective advisor Consult an attorney Unethical Vs Illegal o Not all unethical behavior is illegal all illegal behavior is unethical 11 Competence 12 Integrity 13 Credibility o Restore trust in publicly traded corporations management financial Dishonesty Unfairness Lack of objectivity Irresponsible E1 14 1 Confidentiality 2 Competences 3 Integrity 4 Confidentiality 5 Credibility 6 Confidential 7 Competence 8 Credibility 9 Competence 10 Integrity Regulatory and Business Issues Sarbanes Oxley act of 2002 SOX statements and auditors o CEO CFO Requirements Financial Statements Annual Assessment Internal Control Structure o Independent audit committee o White collar crime penalties International Financial Reporting Standards IFRS o Results of globalization Consistent reporting standards needed worldwide SEC is studying IFRS Extensible Business Reporting Language XBRL o Standardized tagging system for financial reports o Advantages Decreases retrieval time Decreases conversion time Facilitates comparisons Customizes information Sustainability o The ability to meet the needs of the present without compromising the ability of future generations to meet their own needs o Social responsibility o Triple bottom line Profit People planet Shifting economy o Shift away from manufacturing toward service o Managerial accounting has expanded Competing in the Global Marketplace Barriers to international trade have fallen More accurate and timely needed Advanced Information System Enterprise Resource Planning ERO o Systems that integrates a company s functions departments and data o Advantages Streamline operations Respond quickly to changes Replace separate software systems o Philosophy and business strategy of manufacturing without waste o Disadvantages Expensive Lean Production Lowers costs Increases competitive position Just in time JIT o Manufacture just in time to fill orders o Reduces Raw materials inventory Finished goods inventory Storage costs Handling costs Total Quality Management TQM o Goal to provide with superior products and services o Continually set higher goals for quality o International Organization for Standardization ISO ISO 9001 2008 ISO 9001 2008 E1 15 1 IFRS 2 ERP 3 XBRL 4 Directing 5 CFO 6 7 SOX 8 Planning 9 CEO 10 Sustainability 11 Internal Audit 12 TQM 13 Triple bottom line 14 Lean thinking 15 Throughout time Chapter 2 Service o Provides a service o No inventory o Examples Accountants Banks Doctor Lawyers Ad Agencies Merchandisers o Resell products purchased from suppliers o One inventory account o Examples Amazon JC Penney Sears o Retailers vs wholesalers Manufacturers products o Examples Crayola Crayons Dell Computers Craftsman tools o Three inventory Accounts