In the wake of the financial crisis, three-quarters of the world’s CEOs say more emphasis should be placed on measuring the value of non-financial assets such as intellectual capital and customer relationships to drive long-term performance, according to research from the American Institute of CPAs (AICPA) and Chartered Institute of Management Accountants (CIMA). But just 51% of nearly 300 CEOs surveyed in 21 countries say their organisations currently measure the value of non-financial assets well or very well. And only 12% now turn to their finance teams for help with the task.
AICPA and CIMA are releasing these findings today at simultaneous events in New York and London launching the Chartered Global Management Accountant (CGMA) designation.
“Businesses are facing unprecedented challenges. One of the key struggles faced by CEOs is building sustainably for the future in the face of a fixation on financial, short-term gains,” said Charles Tilley, FCMA, CGMA Chief Executive of CIMA. “Our research shows there is an unmet need in the measuring of non-financial information within organisations. Management accountants, who have the depth and breadth to understand the business from multiple perspectives, can help businesses succeed in troubled times and create long-term sustainability.”
The survey conducted for AICPA and CIMA by Oxford Economics and an accompanying paper – ‘Rebooting Business: Valuing the Human Dimension’ – are the first in a series of thought leadership from the accounting organisations highlighting the opportunities and challenges business leaders face in this age of complexity, uncertainty and change. AICPA and CIMA have partnered to elevate the discipline of management accounting, which sits at the intersection of finance and strategy, and establish a global quality standard through the CGMA designation.
“It is crucial that the challenges senior executives face and the decisions they make are supported by strategic, forward-looking guidance based on sound insights that drive strong performance,” said Barry Melancon, CPA, CGMA CEO of the AICPA. ”Powered by the global resources and expertise of AICPA and CIMA, the CGMA signals a combination of financial and managerial prowess that will be recognized around the world.”
“CGMA is a global accreditation, which demonstrates management accounting expertise in areas such as leading strategically with management to make informed decisions; helping organisations manage change, risk and uncertainty; protecting corporate assets; and promoting operational efficiency and effectiveness. Keeping the current Indian business scenario in consideration a CGMA will add immense value to the individual and also to the organization,” said Arati Porwal, Chief Representative, CIMA India.
Offering the perspective of a global executive, Douglas Flint, Group Chairman, HSBC Group Holdings, said, “I think from the board’s perspective, management accounting is the most important aspect of the finance function. Because I think boards, investors, management want to know why the numbers are what they are, not what are the numbers.”
The AICPA and CIMA are hosting a transcontinental, satellite-linked event to launch the CGMA in New York and London today featuring a panel discussion on the global business environment that includes Douglas Flint; Angelo Messina, CFO of Otis Elevator; Roger Tomlinson, Finance Director, Business Partnering of Rolls-Royce plc; Helen Weir, Non-Executive Director on SAB Miller Board; Chris Stanley, Vice President and CFO, Global Network Services of American Express and Gary Kabureck, Chief Accounting Officer of Xerox. The Oxford research will guide the conversation as will the findings from interviews with 17 global business leaders whose organisations collectively employ 2.1 million and have market capitalization of $1 trillion.
Additional results from the research include:
Non-financial value. CEOs say that customers and employees contribute most to the value of the company. Approximately 85% say that customer relationships contribute significantly and customers will be their most important stakeholders going forward. 81% say that knowledge and human capital contribute significantly to the overall value of the business. These should therefore be the primary areas of focus for developing measures of value and it is crucial that companies are able to report this value effectively.
‘Short-termism:’ There is widespread feeling that investor and shareholder demands are inconsistent with growing a sustainable business, with 60% of CEOs agreeing to this statement. Furthermore, 76% agree that the current financial reporting system promotes excessive focus on financials and does not allow them to demonstrate the broader value of their business. More than two-thirds of CEOs, or 69%, think investors’ focus on short-term rewards makes it difficult to plan for the long term.
Greater transparency. According to 87% of respondents, transparency is an opportunity -- but also a juggling act. Approximately 70% agree that it is difficult to find the right balance between being open and protecting commercially sensitive information.
Executive collaboration. Leading CEOs believe that new ways of working are required and expect new levels of collaboration between executive teams, external experts and other stakeholders. CEOs want help in pulling things together – connecting the dots – and are clear that they need the right people to help them do this.
Chartered Global Management Accountant (CGMA)
Two of the world’s most prestigious accounting bodies, AICPA and CIMA, have formed a joint-venture to establish the Chartered Global Management Accountant (CGMA) designation to elevate the profession of management accounting. The designation recognises the most talented and committed management accountants with the discipline and skill to drive strong business performance.
Chartered Institute of Management Accountants (CIMA)
The Chartered Institute of Management Accountants, founded in 1919, is the world’s leading and largest professional body of Management Accountants, with more than 195,000 members and students operating in 176 countries, working at the heart of business. CIMA members and students work in industry, commerce, the public sector and not-for-profit organisations.
American Institute of CPAs (AICPA)
The American Institute of Certified Public Accountants (AICPA) is the world’s largest association representing the accounting profession, with nearly 377,000 members in 128 countries and a 125 year heritage. AICPA members represent many areas of practice, including business and industry, public practice, government, education and consulting.