Strategic Management Accounting
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What is the definition of strategic management accounting?

Strategic management accounting is defined as creating sustainable value by supporting the formation, selection, implementation, and evaluation of organizational strategy and synthesizing information that captures financial and non-financial perspectives for both internal and external environments.

What are two key requirements for successful performance in contemporary organizations?

  • Generating products and services with value that consumers are willing to pay for (correct)
  • Developing innovative technologies
  • Reducing operational costs
  • Generating products and services with high profit margins

    • Management accountants must only focus on traditional scorekeeping tasks.

    False

    What is the main focus of Module 1 in the context of strategic management accounting?

    <p>Value creation</p> Signup and view all the answers

    Define strategic management accounting according to the module.

    <p>Strategic management accounting is defined as creating sustainable value by supporting the formation, selection, implementation, and evaluation of organizational strategy while synthesizing financial and non-financial information for effective resource allocation.</p> Signup and view all the answers

    Value creation is important only for commercial organizations, not for not-for-profit entities.

    <p>False</p> Signup and view all the answers

    _______ is described as increasing shareholder wealth, but this perspective ignores other important stakeholders.

    <p>Value</p> Signup and view all the answers

    What is the aim of CSR reporting?

    <p>to help people understand the sustainable value or effect of an organisation’s activities from a social and environmental perspective</p> Signup and view all the answers

    What does strategic management accounting focus on?

    <p>Improving organizational outcomes</p> Signup and view all the answers

    Strategic management accounting provides forward-looking information to assist management in decision-making.

    <p>True</p> Signup and view all the answers

    Strategic management accounting evaluates ______ information to support the strategic management process.

    <p>external</p> Signup and view all the answers

    What is the role of management accountants in the strategic management process?

    <p>Conducting product life cycle costing</p> Signup and view all the answers

    Management accounting has only a limited focus on helping managers solve problems.

    <p>False</p> Signup and view all the answers

    What is one technique that falls under strategic management accounting?

    <p>Target costing</p> Signup and view all the answers

    Traditional management accounting involves variance analysis, while strategic management accounting involves __________ analysis.

    <p>value chain</p> Signup and view all the answers

    What are some key challenges facing management accountants?

    <p>All of the above</p> Signup and view all the answers

    Innovation can drive competitiveness by creating efficiencies and new products. Is this statement true?

    <p>True</p> Signup and view all the answers

    What is the role of technology in transforming the management accounting profession?

    <p>Technology has automated traditional tasks, improved information quality, and raised management's expectations.</p> Signup and view all the answers

    What does FPB stand for in the context of the given information?

    <p>Ferguson Plarre Bakehouses</p> Signup and view all the answers

    Effective use and control of assets are required for superior results. Mastering areas such as cash flow management and ____ is essential.

    <p>supply chain management</p> Signup and view all the answers

    What was the estimated annual saving achieved by FPB through reusing heat?

    <p>Approximately $290,000</p> Signup and view all the answers

    Companies that are 'born global' attribute their global reach to the advent of the internet.

    <p>True</p> Signup and view all the answers

    The Basel III Accord aimed at minimizing or preventing the same types of problems that caused the __________.

    <p>Global Financial Crisis</p> Signup and view all the answers

    Will the role of strategic management accounting change if the roles and functions of management identified so far in part B of this module change in any way?

    <p>Yes</p> Signup and view all the answers

    What are some characteristics of services that make strategic management accounting challenging in service industries?

    <p>Intangibility of services</p> Signup and view all the answers

    What is a key aim of Basel III?

    <p>Improve risk management</p> Signup and view all the answers

    What is an important issue in a service environment related to managing excess capacity?

    <p>Proper management of excess capacity</p> Signup and view all the answers

    Basel III aims to create a stable international banking system.

    <p>True</p> Signup and view all the answers

    What main difference exists between the public and private sectors in terms of performance measurement?

    <p>Profit as the primary measure</p> Signup and view all the answers

    What are some of the requirements for banking institutions under the Basel III accord by 2019?

    <p>Increasing the level and quality of capital held, implementing counter-cyclical buffers, ensuring leverage does not reach dangerous levels, focusing on risk management, and providing more detailed disclosures.</p> Signup and view all the answers

    What strategic management accounting information may be used to support the objectives of STRONG LEADERSHIP, HEALTHY AND INCLUSIVE COMMUNITIES, QUALITY PLACES AND SPACES, GROWTH AND PROSPERITY, MOBILE AND CONNECTED CITY, and CLEAN AND GREEN?

    <p>Council will lead our changing city using strategic foresight, innovation, transparent decision making and well-planned, effective collaboration; Council will provide and advocate for services and facilities that support people’s wellbeing, healthy and safe living, connection to community, cultural engagement and whole of life learning; Council will lead the development of integrated built and natural environments that are well maintained, accessible and respectful of the community and neighbourhoods; Council will support diverse, well-planned neighbourhoods and a strong local economy; Council will plan and advocate for a safe, sustainable and effective transport network and a smart and innovative city; Council will strive for a clean, healthy city for people to access open spaces, cleaner air and water and respond to climate change challenges</p> Signup and view all the answers

    The most likely impact of Basel III on business will be a reduction in __________ availability.

    <p>credit</p> Signup and view all the answers

    Match the industry with its changing percentage share of GDP in Australia:

    <p>Health = 6.5% Manufacturing = 5.9% Finance and insurance = 8.8% Mining = 8.8%</p> Signup and view all the answers

    What is a tariff?

    <p>A tariff is essentially a tax imposed on goods entering a country.</p> Signup and view all the answers

    What are the benefits of additive manufacturing in terms of cost?

    <p>Additive manufacturing can create significant savings because specific moulds and tools are not needed, there is no excess material to be cut off, and small batch sizes can be generated without substantial inventory.</p> Signup and view all the answers

    What are some risks associated with cloud computing?

    <p>All of the above</p> Signup and view all the answers

    What is big data and why is it important?

    <p>Big data refers to the massive amount of data collected and stored, providing valuable insights into customer behavior and business activity. Analyzing this data is crucial for improving performance.</p> Signup and view all the answers

    What does sustainability in business entail?

    <p>Long-term sustainability in business involves making decisions that are beneficial now and in the future, considering economic, social, and environmental aspects for the well-being of the business and society.</p> Signup and view all the answers

    What is a useful example of economic sustainability issue mentioned in the text?

    <p>Banking crisis during the 2000s</p> Signup and view all the answers

    What is an example of unsustainable social activities mentioned in the text?

    <p>Sweatshops in the textiles industry</p> Signup and view all the answers

    What industry has seen decline due to over______ of fish stocks?

    <p>fishing</p> Signup and view all the answers

    Match the following industries with their need for adaptation due to unsustainable practices:

    <p>Fishing = Overfishing affecting fish stocks Agricultural production = Soil nutrients completely eroded Energy = Transitioning to clean and sustainable technologies</p> Signup and view all the answers

    What kind of factors are considered when making decisions about long-term projects in the context of sustainability?

    <p>Qualitative and non-financial factors</p> Signup and view all the answers

    Study Notes

    Introduction to Strategic Management Accounting

    • Contemporary organisations face internal and external challenges, and creating value for multiple stakeholders is essential.
    • Strategic management accounting plays a crucial role in creating, managing, and protecting value.
    • It involves supporting the formation, selection, implementation, and evaluation of organisational strategy, and synthesising financial and non-financial information.

    Role of Strategic Management Accounting

    • Management accountants must collaborate with general management, corporate strategists, and product development to create, manage, and protect value.
    • Fostering organisational capabilities leads to value creation.
    • Value creation is essential, and organisations must generate products and services with value that consumers are willing to pay for.
    • Organisations must constantly develop and improve resources, activities, and processes to generate value.

    Strategic Management vs. Operational Management

    • Strategic management is directly linked to an organisation's survival, involves non-routine activities, and requires a high-level strategic management orientation.
    • Operational management is not directly related to organisational survival, involves routine day-to-day activities, and requires a tactical management orientation.

    Example of Strategic Management Accounting in Practice

    • Alpha Pty Ltd sells educational toys and uses management accounting information to support operational management.
    • The company uses planning, evaluating, analysing, and controlling phases to achieve its targets.

    Changes in the Role of Management Accountants

    • Advances in technology and information systems have led to a shift in the role of management accountants from traditional scorekeeping tasks to business advisory positions.
    • Management accountants must now focus on non-routine, complex decisions and provide support and training to line managers and employees.

    Strategic Management Accounting in Service Industries

    • Service industries require the support of management accounting tools and techniques.
    • Services differ from products in that they are intangible, unique, and cannot be stored as inventory.
    • Managing excess capacity, measuring and maintaining quality, and accurately costing services are key challenges in service industries.

    Strategic Management Accounting in the Public Sector

    • Public sector organisations do not use profit as their primary measure.

    • Strategic management accounting supports public sector managers in making decisions and establishing metrics for measuring economy, efficiency, and effectiveness.

    • Performance assessment is critical in the public sector, and strategic management accounting can help establish metrics for measuring performance.### Introduction to Strategic Management Accounting

    • Contemporary organisations face internal and external challenges, requiring them to create value for multiple stakeholders.

    • Strategic management accounting plays a crucial role in creating, managing, and protecting value.

    • It involves supporting the formation, selection, implementation, and evaluation of organisational strategy, and synthesising financial and non-financial information.

    Role of Management Accountants

    • Management accountants must collaborate with general management, corporate strategists, and product development to create, manage, and protect value.
    • They must broaden their role from traditional scorekeeping tasks to business advisory positions.
    • Advances in technology and information systems enable management accountants to focus on non-routine, complex decisions.

    Value Creation

    • Value creation is essential in contemporary organisations, and it involves creating products and services of value to consumers and end-users.
    • The essential requirements for successful performance are to generate products and services with value that consumers are willing to pay for, and to constantly develop and improve resources, activities, and processes.
    • Value can be described as combining resources in a manner that creates desirable outcomes.

    Stakeholders

    • Shareholders, customers, employees, suppliers, regulators, lenders, and community groups are all stakeholders with their own interests and desires.
    • Failure to consider stakeholder needs and desires will make it difficult to maintain and increase shareholder wealth.

    Shareholder Value

    • The ultimate outcome for many organisations is to generate wealth for the owners.
    • Measures of value focus on shareholder value, but pursuit of shareholder value while ignoring other areas of value creation is not sustainable.

    Customer Value

    • The primary task for an organisation is to create an output that has customer value.
    • The organisation must produce this output at a cost that is lower than the price the customer is willing to pay, which leads to profitability and creates shareholder value.

    Organisational Value Chain

    • The organisational value chain involves a sequence of activities to provide outputs or outcomes to create customer value.
    • The value chain is supported by a variety of business functions, including research and development, accounting, human resources, information technology, and infrastructure.

    Stakeholder Value

    • Consideration of stakeholders is critical to organisational success.
    • Shareholder wealth is a by-product of generating value in other areas, such as customer value, employee value, and community value.

    Determining Value

    • A significant philosophical issue is determining from which perspective value should be determined.
    • The most obvious perspective is from the organisation itself, but other perspectives, including that of society, also exist.### CSR Reporting and Organisational Value
    • CSR reporting has increased to help people understand the sustainable value or effect of an organisation's activities from a social and environmental perspective.
    • The goal of CSR reporting is to increase the level of ethics and accountability demonstrated by organisations when making value-based decisions.
    • Value is created or destroyed by management through the business model they use, which is dependent on a broad range of relationships and activities.

    Strategic Management Accounting

    • Strategic management accounting aims to provide forward-looking information to assist management in decision-making.
    • It evaluates external information, such as trends in costs, prices, market share, competitors, suppliers, and technologies, and their impacts on resources.
    • Strategic management accounting uses a wide range of tools and techniques to support each stage of the strategic management process.
    • Its primary goal is to help organisations create long-term, sustainable value that benefits all stakeholders.

    Strategic Management Process

    • The strategic management process involves defining the organisation's strategy and the process by which managers make a choice of a set of strategies.
    • It is a continuous process that evaluates the business and the environment, evaluates/re-evaluates its competitors, and defines its objectives and strategy.
    • The process involves:
      • Strategic analysis: scanning the internal and external organisational environment.
      • Strategy evaluation: performance measurement, feedback, and review.
      • Strategy planning and choice: developing specific strategies, actions, and measures.
      • Strategy implementation: crafting an effective organisational structure, processes, and culture.

    Strategic Management

    • Strategic management involves:
      • Addressing key issues, including determining the vision, mission, and purpose of an organisation.
      • Setting specific objectives.
      • Creating and implementing the strategies to achieve these objectives.
    • The strategic management process is critical in evaluating an organisation's planning systems and processes and for indicating ways of improving their effectiveness.

    Operational Management

    • Operational management involves the implementation phase of strategic management, turning the strategy into reality.
    • The relationship between senior strategic managers and operational managers is crucial, with a strong link between the two levels via the strategic implementation phase.
    • Strategic management accounting supports operational planning with tools such as budgeting, costing systems, and variance analysis.

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    Module 1: Introduction to Strategic Management Accounting PDF

    Description

    Learn about strategic management accounting and its role in creating sustainable value for organisations by supporting strategy formation, selection, implementation, and evaluation.

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