THE FFSC Management Accounting Project A Discussion of Framework, Background, and Objectives Steven L. Hofing Chair, FFSC Technical Committee Partner, Ag Education & Consulting
[email protected] 2000 Technical Symposium
Overview of Management Accounting Project August 12, 2000 Slide 1
Topics of Discussion Terminology confusion and the importance of a sound conceptual framework Issues and challenges around each of the three project components
Conceptual Framework Chart of Accounts Standard Integrated Financial and Production Measures
Our process for execution of the project 2000 Technical Symposium
Overview of Management Accounting Project August 12, 2000 Slide 2
Choose Your Weapons!
2000 Technical Symposium
Overview of Management Accounting Project August 12, 2000 Slide 3
Financial Accounting (Reporting) Focused on needs of external users who lack the authority to prescribe the information they want and must rely on information management communicates to them Common interests of many users focus on the ability of an enterprise to generate favorable cash flows, but objectives are often phrased using investment and credit decisions to give them a focus 2000 Technical Symposium
Overview of Management Accounting Project August 12, 2000 Slide 4
Financial Accounting (Reporting) Primary focus is on earnings and its components Provides information about an enterprise’s financial performance during a period and about how management has discharged it’s stewardship responsibility to owners
2000 Technical Symposium
Overview of Management Accounting Project August 12, 2000 Slide 5
The Conceptual Framework for Financial Reporting Objectives – useful to investors and creditors Qualities – relevance, reliability, comparability, and consistency Assumptions – economic entity, going concern, monetary unit, and periodicity Principles – historical cost, revenue recognition, matching, full disclosure, Constraints – cost-benefit, materiality, industry practice, conservatism 2000 Technical Symposium
Overview of Management Accounting Project August 12, 2000 Slide 6
The Manager’s Need for Information Plan effectively Direct operations Solve problems
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Overview of Management Accounting Project August 12, 2000 Slide 7
Managerial Accounting
Focuses on providing data for internal uses Places much more emphasis on the future Is not governed by GAAP Emphasizes relevance and flexibility Places less emphasis on precision and more emphasis on nonmonetary data Emphasizes segments rather than the entity Draws heavily on other disciplines Is not mandatory 2000 Technical Symposium
Overview of Management Accounting Project August 12, 2000 Slide 8
Similarities among Managerial and Financial Reporting Both rely on the accounting information system Both are concerned with stewardship, with financial accounting concerned with stewardship over the company as a whole, managerial accounting concerned with stewardship over its parts 2000 Technical Symposium
Overview of Management Accounting Project August 12, 2000 Slide 9
Managerial Accounting and the NPPC Standards Financial Accounting Managerial Accounting External Focus Compliance activities Investor Reporting Outside constituency Whole entity oriented databases
2000 Technical Symposium
Internal focus Decision support activities Management reporting Internal constituency Segment focused / specialized databases
Overview of Management Accounting Project August 12, 2000 Slide 10
Cost Accounting? Compliance
Financial Investor Reporting
Whole Entity Databases 2000 Technical Symposium
Overview of Management Accounting Project August 12, 2000 Slide 11
Cost Accounting? Compliance Decision Support Managerial Financial Investor Reporting
Segment/Specialized Databases Management Reporting
Whole Entity Databases 2000 Technical Symposium
Overview of Management Accounting Project August 12, 2000 Slide 12
Cost Accounting? Compliance Decision Support Managerial Financial Investor Reporting
Segment/Specialized Databases Management Reporting
Whole Entity Databases 2000 Technical Symposium
Overview of Management Accounting Project August 12, 2000 Slide 13
The integration of systems, managerial, and financial reporting
Internal books and records
Adjustments/ Reformatting
Managerial Reporting/Analysis
Adjustments/Reformatting/ Additional disclosure
External Reporting
2000 Technical Symposium
Whole entity reporting
Overview of Management Accounting Project August 12, 2000 Slide 14
The Challenge of our MA Project Build a foundation of concepts (when some groups have already got the house pretty well complete) Balance usefulness and cost (and vagueness and specificity) Create a forum for acknowledging commonality of purpose while allowing industry specific requirements Involve all key users with interest and background in management information systems for agricultural producers Integrate systems guidance, benchmarking requirements, and managerial flexibility 2000 Technical Symposium
Overview of Management Accounting Project August 12, 2000 Slide 15
Project Components Conceptual Framework Zero Level Chart of Accounts Enterprise Level Production and Financial Measures
2000 Technical Symposium
Overview of Management Accounting Project August 12, 2000 Slide 16
The Conceptual Framework Identification of the components of useful information General elements of reports and measures Cost, production, and profit center definition Integration of economic, financial, and managerial analysis Identification of impact and implications of selecting non-complying approaches for managerial information 2000 Technical Symposium
Overview of Management Accounting Project August 12, 2000 Slide 17
The Zero Level Chart of Accounts Recommendations for accounting systems Discussion of numerical and hierarchical designs General guidance (versus specification) for commodity group application
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Integrated Production and Financial Measures Specification of summary level measures at the entity level Guidelines for overall grouping and identification of segment level integrated measures
2000 Technical Symposium
Overview of Management Accounting Project August 12, 2000 Slide 19
Project Approach Workplan and Schedule Organizational Hierarchy
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Overview of Management Accounting Project August 12, 2000 Slide 20
The Workplan and Schedule Sep-00 Oct-00 Nov-00 Dec-00 Jan-01 Feb-01 Mar-01 Apr-01 May-01 Jun-01
Oct-01
1. Concepts White Paper 2. Chart White Paper 3. Tech Comm Working Session 1 4. Multi Commodity Meeting FFSC Annual Meeting 5. Measures White Paper 6. Tech Comm Working Session 2 7. Multi Commodity Meeting (optional) 8. Measures Exposure Draft 9. Final Approval
2000 Technical Symposium
Overview of Management Accounting Project August 12, 2000 Slide 21
The Organizational Hierarchy E x e c u t iv e C o m m it t e e A d v is o r y C o u n c il T e c h n ic a l C o m m it t e e S u b c o m m it t e e s
2000 Technical Symposium
D e v e lo p e r s
Overview of Management Accounting Project August 12, 2000 Slide 22
We Need Your Help!!
2000 Technical Symposium
Overview of Management Accounting Project August 12, 2000 Slide 23