Plan for new global accounting principles launched

India Infoline News Service | Mumbai |

Two of the world’s leading accountancy bodies launch international consultation on new management accounting framework to be carried out in 177 countries

The Chartered Institute of Management Accountants (CIMA) and the American Institute of CPAs (AICPA) have proposed a comprehensive framework to bring consistency to management accounting practices around the world and help organisations to make smarter, faster decisions for the long-term amidst growing complexity and change.
 
The draft framework, entitled ‘Global Management Accounting Principles©: Driving better business through improved performance’, is now out for consultation with feedback sought from businesses and institutions across the world – public and private, small and large.
 
Charles Tilley FCMA, CGMA, Chief Executive of CIMA, said: “Over the last few years, we’ve all seen how globalisation and the break-neck pace of technological progress are making change harder to predict and organisations more vulnerable.”
 
“We may now be seeing encouraging signs in the global economy, but we cannot afford to be complacent. We must learn the lessons of the last six years. To be confident of a successful future over the long-term, organisations must adopt a robust management accounting system that encompasses their financial reporting. This in turn will provide investors, customers and the general public with a greater confidence.”
 
“Management accountants have the ability and judgement to make objective, ethical decisions that consider the public interest. But the quality of management accounting remains varied. Our Principles will enable organisations to leverage both financial and, importantly, non-financial data. They will provide the forward-looking focus and link different parts of an organisation in a way that many still lack.”
 
The draft Principles outline the values and qualities that represent best practice management accounting on a global scale.  They include guidance on preparing relevant information, modelling value creation, communicating with impact and establishing the professional values of management accountants.  The framework will include a diagnostic tool which will help businesses and institutions to ensure that they are making the most efficient use of key information.
Charles Tilley continued: “We are asking businesses and other relevant organisations across the globe to tell us how our draft framework can best meet their fast-changing needs. By working together, we can contribute to a comprehensive system fit for our era of uncertainty that will, put simply, make business better.”
 
The consultation will reach across CIMA and the AICPA’s network of 177 countries. The two institutes joined forces to launch the Chartered Global Management Accountant (CGMA) designation in 2012 and are working together to highlight the importance of management accounting in today’s economic climate.  A series of national and international events is planned, including local employer roundtables and meetings with leading business thinkers from all sectors and all geographies.
 
The consultation will close on 10 May 2014. To learn more and respond to the consultation, please visit: http://www.cimaglobal.com/principles
 
The draft Principles have already attracted considerable support from within the business community.
 
Douglas Flint, Group Chairman of HSBC Holdings, said: “In my view, management accounting is a critical aspect of the finance function because it informs the board, investors and management why the numbers are what they are, not just what the numbers are. So I believe that the introduction of a set of global management accounting principles will be very welcome to businesses around the world, and I would urge businesses to input into this important consultation”.
 
Ian Powell, Chairman and Senior Partner of PwC UK, said: "Management accounting and financial accounting are natural bedfellows which demand global standards. We welcome the plan for the development of a new management accountancy framework, and will encourage our clients across the world to contribute to and adopt it.” 


Paul Druckman, CEO of the International Integrated Reporting Council, said: “Great management accounting has long been a critical part of helping businesses and organisations deal with an ever-widening set of challenges. With a focus on value creation and relevance of information, there is synergy between the Global Management Accounting Principles and Integrated Reporting. We should all support this plan to put in place a consistent global management accounting framework, which will help more and more organisations deliver value over the long-term.”
 
Professor Mervyn King, Chairman of the International Integrated Reporting Council, said: “I am pleased to see a framework that provides disciplined management accounting practices and ensures that reporting is fit for the 21st century. In an era of a gradual return to economic growth, integrated thinking is essential for sustainable value creation. The ability to use information effectively will be a crucial part of sustainable growth and ensuring the business models of organisations and their outputs have positive impacts financially, socially and environmentally.“ 
 
Other supporters of the Principles include:
 
Steve Marshall, Chairman, Balfour Beatty, said: “Accountants have had good quality guidance on historic reporting for a long time. But the real focus of companies should be forward looking - understanding their business model, understanding how value is created and what the key drivers of the business are.”
 
“The reality is that until now there hasn’t been high quality guidance about how management accountants should support and assist their companies in how they look at their value model, but that will change with the introduction of these new guidelines.”
 
Mark Garvey, Group Finance Director, Glanbia plc, said: "I am delighted to see a well thought through set of Management Accounting Principles being outlined after a truly collaborative effort by CIMA and the AICPA.  This framework will provide a sound basis for developing disciplined management accounting practices in the corporate world which will add shareholder value in the long term."
 
Steven Swientozielskyj, previously Head of Finance Shared Services at Network Rail, said: “This thought leadership and insight establishes and sets the global gold standard for management accounting for years to come."
 
Shannon Anderson, Professor of Management at the University of California, said: “CIMA and AICPA have taken an important step in developing a framework that highlights the centrality of management accounting and governance practices to value creation. We see that management accounting is not simply a collection of tools or practices, but a continual process of articulating, executing, and evaluating the strategy and business model for delivering value.”
 
Professor Matthew Cripps, Programme Director at NHS RightCare, said: "It is reassuring to see CIMA use the opportunity of designing this framework to develop the skills of management accountants so that supporting continuous quality improvement and increasing value are seen as integral components of 'what finance do'. As someone working in the public sector, I find this particularly heartening."
 
Chandan Khaitan, previously Regional Controller – West India at Nestle India, said: "In today's VUCA world, standardised management accounting practices are required more than ever. It is encouraging to see CIMA and the AICPA making this important contribution."
 

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