Summary of Pushing the Art of Management Accounting

Pages: 5 (894 words) Published: September 22, 2014


Summary of Pushing the Art of Management Accounting
Hui (Steven) Zhang
Trinity Western University
Instructor: Brent Groen
iMBA 521 Management Accounting
Nov 18th, 2013

Summary of Pushing the Art of Management Accounting
In this article “Pushing the Art of Management Accounting”, Alexander Mersereau discusses the bottleneck of the development of management accounting practice. He not only points out the core problem of the bottleneck through vivid metaphor, but also gives several suggestions. First of all, Mersereau describes relevant backgrounds of the development of management accounting practice. He refers to a rapid development during the early part of the twentieth century. However, by the early 1980s, management accounting had reached a point of stagnation. In H. Thomas Johnson and Robert S. Kaplan’s point of view, the stagnation occurred because “today’s management accounting information, driven by the procedures and the cycle of the organization’s financial reporting system, is too late, too aggregated and too distorted to be relevant for managers’ planning and control decisions’ and ‘Management accounting reports are of little help to operating managers as they attempt to reduce costs and improve productivity” (Mersereau, 2006). These authors regard the functions of the management accounting practice as a failure because of the untimely and inaccurate passage of information to decision makers. This point of view is widely acknowledged and “set off a wave of innovation and interest in the management accounting profession worldwide”(Mersereau, 2006). The innovations included the activity based cost management (ABC), the Balanced Scorecard (BSC), and the economic value added (EVA), which brought positive results and were considered as another rapid set of developments. However, another point of stagnation appeared. The stagnation can be understood from the facts given out: “the majority of firms adopting EVA measures apparently don’t use them significantly. Balanced Scorecard researchers have concluded that most users make little attempt to link their non-financial performance to strategy and that only a small minority attempt to validate the cause and effect linkages included in their models” (Mersereau, 2006). To explain this stagnation, the author lists several factors: for instance, technical or structural factors like the organizational strategy which might not work well with the new management accounting tools and implementation-related factors. However, from the perspective of the author, the main problem “lies in the need for a better management of the management accounting process itself” (Mersereau, 2006), of which my interpretation is that the unwillingness of the members in a company to get involved and the insufficient communication make it difficult for the management accounting to play its role in making an organization more efficient. Next, Alexander uses the tale of the three monkeys to explain and illustrate his point of view. In the first place, since the management accountant is the first important role in the management accounting process, his function is to observe things comprehensively and pick out pieces of information that he considers to be important and to pass on the information to the intended audience efficiently and effectively, which is described as the ‘speaking monkey’. The next important point of the communication process is the managers who receive information. They need to interpret the information accurately through the knowledge they know about the management accounting concepts. The process is called the ‘hearing monkey’. Last, but not least, the managers are to act according to the information they interpreted. In this process, they need to exclude subjective factors to ensure that their decisions are mostly aligned with corporate objectives. This role is called the ‘seeing monkey’. In order to solve possible problems in these three...

References: Mersereau, A. (2006). Pushing the art of management accounting. (cover story). CMA Management, 79(9), 22-27.
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