Role of Management Accounting in International Firm

Topics: Financial ratio, Strategic management, Firm Pages: 3 (839 words) Published: May 3, 2010
1) Financial knowledge enables central control to determine what is happening in different subsidiaries. That enable the integration and control of subsidiaries by the central control. (Belkauoi, 1991) 2) Management accounting’ involvement in currency management is also important as the fluctuations in the exchange rates can distort the financial results of the subsidiaries. (Eiteman, Stonehill and Moffet, 1992). 3) Management accounting is a means of co-ordinating established configurations and its form depends on the strategies a firm adopts for configuration and co-ordination (Tomkins, 1991) 4) Study by Biles and Assada (1991) investigated how the Japanese and American ownership firms evaluated the performance of their subsidiaries. The US firms frequently used financial ratios for performance measurement. ROI was by far most important, whereas Japanese firms pay more attention to individual line-items in the budget such as sales volume and production costs. 5) Horovitz(1978) compared management controls between UK, French and German firms. He concluded that German and French firms tend to be more centralized than the UK firms. The control systems of German and French companies were more detailed than that of UK firms. 6) Holzer and Schonfelt (1986) illustrated that accounting systems of major European and US firms differ greatly and, although internationalisation affects their management accounting systems, it does not do so in a linear fashion. Factors:

1) Configuration.
2) Strategy.
3) Ownership of the firm.

The international firms have disperse configuration as their activities in the value chain are spread throughout the world. Therefore, the international firms use management accounting to co-ordinate and integrate their activities in different countries. The role and scope of management accounting...
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