The American Institute of CPAs and the Chartered Institute of Management Accountants have proposed a framework with the goal of bringing consistency to management accounting practice across the world.
The organizations, which represent 600,000 accountants and students through their Chartered Global Management Accountant joint venture, developed the draft framework, “Global Management Accounting Principles: Driving better business through improved performance,” to help CFOs, CEOs and boards of directors benchmark and improve their management accounting processes as the discipline takes on more importance.
Business leaders are increasingly turning to management accountants, the organizations noted, asking them to provide forecasts, find new trends in operations, provide insight from data, and apply financial rigor to their business strategy, as they work to position their organizations for long-term, sustainable success.
“Our goal is to help management accounting professionals build higher performing organizations that can power stronger economies around the world,” said AICPA president and CEO Barry Melancon in a statement. “From this global consultation, we will deliver a blueprint for rigorous forecasting and decision making that meets the needs of business and provides a framework for enduring success.”
The proposed framework includes guidance on how to identify financial and non-financial information suitable for analysis; model scenarios to prioritize opportunities; and communicate with clarity to guide better decisions. It stresses the importance of integrated thinking and evidence-based decision making.
“Management accountants have the ability and judgment to make objective, ethical decisions that consider the public interest, but the quality of management accounting remains varied,” said CIMA chief executive Charles Tilley. “By working together, we can contribute to a comprehensive system fit for our era of uncertainty that will, put simply, make business better.”
The consultation will span CIMA and the AICPA’s footprint of 177 countries and include roundtables and meetings with employers, executives and academics across sectors and locations as the Institutes they work together to strengthen management accounting around the world. The two organizations introduced the CGMA joint venture in 2012.
The draft principles have already attracted support from several leaders in the business community, including Douglas Flint, group chairman of HSBC Holdings, who said, “In my view, management accounting is a critical aspect of the finance function because it informs the board, investors and management why the numbers are what they are, not just what the numbers are. So I believe that the introduction of a set of global management accounting principles will be very welcome to businesses around the world, and I would urge businesses to input into this important consultation.”
Paul Druckman, CEO of the International Integrated Reporting Council, said, “Great management accounting has long been a critical part of helping businesses and organisations deal with an ever-widening set of challenges. With a focus on value creation and relevance of information, there is synergy between the Global Management Accounting Principles and Integrated Reporting. We should all support this plan to put in place a consistent global management accounting framework, which will help more and more organisations deliver value over the long-term.”
Shannon Anderson, professor of management at the University of California-Davis, commented, “CIMA and AICPA have taken an important step in developing a framework that highlights the centrality of management accounting and governance practices to value creation. We see that management accounting is not simply a collection of tools or practices, but a continual process of articulating, executing, and evaluating the strategy and business model for delivering value.”
The two organizations are inviting business leaders to review the proposal and offer feedback during a three-month consultation period that ends May 10, 2014.
To view the proposal and respond, visit http://www.cimaglobal.com/principles.