Page 720 - Encyclopedia of Business and Finance

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Statements on Management Accounting

the reluctance of corporate organizations to reveal what Historically, once the two advisory panels’ comments
they regard to be proprietary data in the areas of nonfi- were reviewed by the subcommittee and appropriate mod-
nancial and forward-looking information. ifications to a draft made, a proposed SMA was submitted
The recommendations of the AICPA Special Com- to the MAP Committee for approval. The committee
mittee reflect the needs and desires of investors and other would then take one of three possible actions: (1) approve
the draft as recommended, (2) further modify and then
business report users to have increasing amounts of infor-
mation and information of a nontraditional nature. approve the draft, or (3) return the draft to the subcom-
Obtaining nonfinancial and predictive data requires access mittee to be developed further. Historically, SMAs were
published only after completion of this review process and
to previously nondisclosed or proprietary items tradition-
final approval requiring a two-thirds majority vote by the
ally used by management accountants within their com-
MAP Committee.
panies. Thus the IMA, through their SMA promulgation
mechanism, may be in a good position to produce sugges-
tions in these areas of recommended increased disclosure. CONTENT
While investors and others strive to obtain increased The SMA subcommittee was guided by a framework for
amounts and different types of business information, management accounting that considered five broad cate-
companies with reporting responsibility are concerned gories: (1) objectives, (2) terminology, (3) concepts, (4)
with safeguarding information for which disclosure may practices and techniques, and (5) management of
affect their competitive position. Recommendations are accounting activities. All SMAs are classified and num-
needed for the control of what information should be bered based on this five-element framework. For example,
SMA No. 1A is included in the objectives classification.
released in many cases. This issue is one that will likely be
Dates of publication are indicated parenthetically after
addressed by a convergence of several professional
each title.
accounting groups. If accounting organizations though
SMA promulgation or other means are unable to achieve In addition to following the five-element framework,
a satisfactory resolution on demands for increased disclo- the IMA’s approach to the content of future SMAs, as
with past statements, is clearly based on, and fully consis-
sure, the judicial system may ultimately have to establish
tent with, the MAP Committee’s definition of manage-
these boundaries.
ment accounting as follows:
PROCESS Management accounting is the process of identifi-
In promulgating statements, the MAP committee histori- cation, measurement, accumulation, analysis,
preparation, interpretation, and communication
cally used a Subcommittee on SMA Promulgation. Gen-
of financial information used by management to
erally, each subcommittee member oversaw the process of
plan, evaluate, and control within an organization
promulgating a particular SMA. After a proposed state- and to assure appropriate use of and accountabil-
ment was drafted, there followed a rigorous exposure ity for its resources. Management accounting also
process whereby input was solicited from other members comprises the preparation of financial reports for
of the accounting profession through the selection of two non-management groups such as shareholders,
advisory panels. creditors, regulatory agencies, and tax authorities.
(Management Accounting Practices Committee,
One panel was composed of a sample of IMA chap- 1981)
ter presidents or other individual chapter representatives.
(In 2005 the IMA had 250 local chapters organized geo- The majority of issued SMAs are written for use by
graphically in cities across the United States and 9 chap- accounting practitioners. This perspective is consistent
ters in other countries.) The other panel was composed of with the fact that the greatest number of statements issued
representatives nominated from other accounting or to date have been in the Practices and Techniques cate-
accounting-related organizations, including the AICPA, gory. This is also consistent with the stated purpose of an
the Financial Executives International, the American SMA, which is to supply an in-depth understanding of a
Accounting Association, and the Society of Management management accounting subject that would allow a prac-
Accountants of Canada. Although no new SMAs had titioner to implement the concepts and techniques. Often
been produced since the combination into the MAC/FAR the application of information included in an SMA is
group, the MAC/FAR Committee was reviewing the illustrated by studies of companies who have imple-
existing SMAs and discussing the prioritization of revi- mented the techniques.
sions based on a planned practice analysis that was to be The content of issued SMAs ranges from fundamen-
completed in late 2005. tal issues, such as SMA No. 1A, “Definition of Manage-

ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION 697