STRATEGIC MANAGEMENT ACCOUNTING – A MESSIAH FOR
Haider Shah (Corresponding author)
Business School, University of Hertfordshire, Hatfield, U.K AL10 8PN Email: email@example.com
Business School, University of Hertfordshire, Hatfield, U.K AL10 9AB Email: firstname.lastname@example.org
Muhammad Shaukat Malik
Institute of Management Sciences, Bahuddin Zakariya University, Multan. (Pakistan) Email: email@example.com
When management accounting was introduced as an advanced version of cost accounting after second world war its early advocates had claimed that it would make accounting more useful in assisting managers in their decision making function. As the discipline has failed to live up to the promise now strategic management accounting has been presented as a messiah for the discipline of accounting. New promises have been made that while the traditional management accounting failed to make use of strategic thinking and other qualitative aspects of management the new discipline is likely to make accounting more relevant and important for managers. The empirical evidence on successful diffusion of strategic management accounting is still not overwhelming. It is therefore yet to be seen if strategic management accounting can live up to its promise in future or not.
Keywords: Management, strategic management, cost accounting, strategic management accounting, decision making
Most textbooks of management accounting define the discipline in terms of its decision making role. It is generally stated that since managerial functions involve using information for better planning and control, therefore, management accounting is very important for effective and successful management at all levels. In this paper, we review the role of management accounting and after identifying its limitations we examine the claim that strategic management accounting is the future of this discipline. The analytical paper looks at the development of strategic management accounting as a new discipline which promises to be the flagship of the accounting profession. It makes a contribution to the general management literature by clarifying the role of management accounting in decision making and signifying the need for more empirical evidence on usefulness of strategic management accounting for general management.
The remaining of the paper is divided into four sections. In section 2 we review the role of traditional management accounting in decision making. In the second section 3, we describe the research methodology adopted for this paper and in the section 4 the potential of strategic management accounting in becoming a messiah for the management accounting discipline has been analysed. Finally in the section 5 conclusions are drawn and recommendations for further research are made.
2. MANAGEMENT ACCOUNTING AND DECISION MAKING
One comes across various definitions of „accounting‟ in the textbooks; however, almost all definitions identify two important elements of accounting. First, „process‟, where accounting is said to identify, measure, analyse and report economic information. Second, „purpose‟ which is stated to be helping the users of that information Australian Journal of Business and Management Research Vol.1 No.4 [01-07] | July-2011 2
make better decisions (American Accounting Association, 1966, p1). As opposed to financial accounting which provides economic information from the perspective of many external users, management accounting (MA hereafter) focuses mainly upon the needs of internal managers of an organisation (Hopper et al., 2007). In his review of the development of the discipline, Roberts (1989) states that the MA related practices do not owe their development to the MA as most of them were already in existence in...