Epstein and Lee (1999, p: 25) noted that the first revolution of management accounting was provided with new decision-making tools for managers by academic accountants. These tools were developed during this period which introduced various issues. Firstly, tasks are routine at operational levels and managerial. Secondly, the environment in which an organization operate remains with few price or demand fluctuation. Finally, there was only one purpose for the management accounting which was to help in making decisions. The first management accounting textbook in this period was written by Robert Anthony in 1956 which focused on how new problems can be analysed and suitable measures of cost.
The second management accounting revolution appeared at the beginning of the 1980s, when researchers recognized that the management accounting method was no longer reliable to solve problems which managers face. Furthermore, Jonson and Kaplan (1987) argued that management accounting lost its relevance and the purpose which inform managers their decision. New management accounting techniques have been developed since the publication of Jonson and Kaplan (1987) such as, ABC (activity based costing) and JIT (just in time).
Factors which influenced management accounting to change its role:
The accountants expert agreed that there were external factors which influenced management accounting to change its nature. These factors will be discussed briefly namely: globalization, technology, accounting scandals and corporate trends.
The increase of globalization in business in the last 30 years has had an important impact on management accounting role. Because of real time information (information through the internet), global distribution network, cheaper and faster transportation, most companies face international competition rather than local one. With lower and reducing barriers global trade can be made instantaneously. Products have a shorter life cycle. As a result of that , most producers face short completion periods which have to be used quickly. This development has a significant impact on management accounting because business managers these days demand faster access to the global information which could be provided by the development technology. Furthermore, customer satisfaction have become focused by many organizations. Customers take availability of product variety as shown and might not essentially. Therefore customer satisfaction keep customers who they already have and new customers are a priority for the business.
The second factor which influenced management accounting to change its nature is the advance in information technologies. One of these forward movements is the progress of database technology which provide the capacity to store a vast amount of information in accessible ways. Furthermore, the new database can analyse information in different ways. Information system that meets the needs of the various users which can be easily designed. In addition, the managers and most of people in the organization have PCs on their own desks. They use them to access the information which they need without supervision. Today with an appropriate software and small laptop computer can produce management accounts in couple of minutes and transmit them to the other side of the world in one click (Hopper, et al.2007, p: 120 ).
The increase number of financial scandals in recent years has raised a question about failing role of the accounting and auditing profession (, p: 120). This is because of the ethical failures in the community of business has appeared. As a result of that a new strict regulation which evaluate the effectiveness of control which may reduce the demand for an external auditor who is too costly.
In the 1970s there was a wave to merge between organizations merged with others to make larger conglomerates. This wave changed in the 1990s to the opposite direction. Organizations have moved to demerge which reduced the ramifications in management processes and focus on the information need ().
The new management accounting role:
In the last 3 decades, most companies had an accounting department which included financial accountant experts, management accountants, auditors, tax experts and more. Moreover, the department could have a mix of qualified accountants. These accountants were separated from the rest of the business. Their responsibility only was to discuss the monthly accounting was expert in the preparation and inter-preparation of business information to make decision and control. In traditional form, management accountants roles involved undertake scorekeeping tasks such as, collating performance data.
Referring to the factors which influenced on the role of management accounting, there are a considerable changed in many ways:
The way of reading financial statements has changed. The financial statements are being seen as forward. Management accountants are being able to forecast the next financial period from the current financial statement (Burns, and Scapens, 2000). This can be important because whereas accountants usually associate with financial statements, managers identify from forecasts. Forecasts usually need significant inputs from employees in department and functions, because of they are the only workers who have the essential detailed knowledge.
Organizations now have more strategic focus which guide to use non-financial measures of performance such as customer satisfaction(Burns, and Scapens, 2000). Accountants are required an extensive understanding of business and it operations. As results of these accountants have to bring wide view of the business expressed in the performance indicators which one of management accountants’ responsibilities.
Since "hybrid" emerged accountants in most organizations who has many qualities such as, Willing and being able to be team member, broad performance skills, integration of different understandings and proactive in strategic matters (, p: 123). “A hybrid accountant is someone who has both accounting knowledge and an in depth understanding of the operating functions or commercial processes of the business” (Burns, Scapens, 2000). The organizations had changed from a functionally organized business to a process based descriptor of organization. If possible each land site was responsible for the whole its actions from the receipt of an order to bringing in the final product and whereby, each unit. Under this new structure there is a process leader who responsible for all these activities, together with the associated backup functions which are an integral component part of the process.
Conclusion:
This essay has discussed three main points. Firstly, the history and development of management accounting. There were two historical revolutions which first one was between 1950 and 1980, and the second one was between 1980 and 1999. Secondly, factors which influenced management accounting to change its role. These factors appeared in recent decades which are globalization, advances in technology, accounting scandals and corporate trends. Finally, the new management accounting role. New techniques have emerged as a result of the factors which discussed.
The role of management accounting has changed considerably over the last few decades.Management Accounting could be the wave of future for accounting. Because of
new management techniques, accounting has become more vital to the organization as a whole. Some of the new ways of management include total quality management, just-in-time (JIT) production and purchasing methods and forecasting by using the financial statements. These various kinds of management styles pull accounting into the organization process more easily. Accounting has become a tangible part of the management process; therefore, the need of Management Accounting has grown in proportion to the new management styles. Accountants are now becoming a larger part of cross functional teams and are being used more in the decision making process.
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References:
Burns, John and Scapens, Robert. (2000). ″The Changing Nature of Management Accounting and the Emergence of “HYBRID” Accountants″. Available: www.ifac.org/library/november2000. Last accessed 05 AUG 2010.
Epstein, M. J., Lee, J. Y. & (2010), Advances in Management Accounting, Emerald Group Publishing Limited, Bingley.
Hopper, T., Northcott, D. & Scapens, R.(2007), Issues in Management Accounting, 3rd Ed, pearson education limited.
Institute of Management Accountants, authors: Russell et al, (IMA) (1999) Counting more, counting Less: Transformations in the Management Accounting Profession (Executive Summary), Montvale, NJ: Institute of Management Accountants (IMA) Publishing.
Johnson, H.T. and Kaplan, R.S. (1987) Relevance Lost: The Rise and Fall of Management Accounting, Boston, MA: Harvard University Press.
Parker, R. H. & Yamey, B. S. (1994), Accounting History Some British Contributions, Oxford University Press, Oxford.
