Prepared by Debby Bloom-Hill CMA, CFM CHAPTER Managerial Accounting In the Information Age Slide 1-2 Managerial Accounting  Managerial accounting is designed for internal users  The goal of Managerial Accounting is to provide the information managers need for  Planning  Control  Decision making Slide 1-3 Learning objective 1: State the primary goal of managerial accounting Planning  Planning is a key activity for all companies  Communicates a company’s goals to employees  Aids coordination of various functions such as sales and production  Specifies the resources needed to achieve company goals Slide 1-4 Planning  Budgets for planning  Profit budget  Indicates planned income  Cash flow budget  Indicates planned cash inflows and outflows  Production budget  Indicates the planned quantity of production and expected costs Slide 1-5 Learning objective 2: Describe how budgets are used in planning Planning Slide 1-6 Learning objective 2: Describe how budgets are used in planning Control  Organizations achieve control by:  Evaluating managers to determine how their performance should be rewarded or punished  Evaluating operations to provide information as to whether they should be changed or not Slide 1-7 Learning objective 3: Describe how performance reports are used in the control process Planning and Control Process Slide 1-8 Learning objective 3: Describe how performance reports are used in the control process Sample Performance Report Slide 1-9 Learning objective 3: Describe how performance reports are used in the control process Managerial vs Financial Accounting  Unlike Financial Accounting, Managerial Accounting:     Is directed at internal users May deviate from GAAP Presents more detailed information May present more nonmonetary information  Places more emphasis on the future Slide 1-10 Learning objective 4: Distinguish between financial and managerial accounting Information Age and Managerial Accounting  Advances in information technology have:  Increased competition and also created opportunities and cost savings for firms that use information for strategic advantage  Impacted information flows up and down the value chain (i.e fundamental activities that a firm engages in to create value) Slide 1-25 Learning objective 7: Discuss the impact of information technology on competition, business processes and the interactions companies have with suppliers and customers The Value Chain Slide 1-26 Learning objective 7: Discuss the impact of information technology on competition, business processes and the interactions companies have with suppliers and customers Impact of Software Systems on the Value Chain  Enterprise Resource Planning (ERP)  Computerize inventory control and production planning  Supply Chain Management (SCM)  Organization of activities between a company and its suppliers  Customer Relationship Management (CRM)  Manages a variety of customer interactions Slide 1-27 Learning objective 7: Discuss the impact of information technology on competition, business processes and the interactions companies have with suppliers and customers Ethical and Unethical Behavior  Examples of unethical behavior  Enron managers mislead investors by hiding debt, i.e Kenneth Lay, CEO, found guilty of fraud  WorldCom overstated profits  Bernard Ebbers, CEO, received a 25 year prison sentence  Dennis Kozlowski, head of Tyco, was charged with avoiding taxes  Sam Waksal, cofounder of IMClone, was charged with insider trading Slide 1-28 Learning objective 8: Describe a framework for ethical decision making Sarbanes-Oxley Act  Enacted by Congress in July 2002  Requires CEO and CFO to certify that the financial statements not contain any untrue statements or omissions  Bans certain types of work by the company’s auditors to ensure their independence Slide 1-29 Learning objective 8: Describe a framework for ethical decision making Sarbanes-Oxley Act  Provides for longer jail sentences and larger fines for executives (i.e fines up to $5 million and jail terms up to 20 years)  Requires companies to report on the existence and reliability of internal controls Slide 1-30 Learning objective 8: Describe a framework for ethical decision making Framework for Ethical Decision Making  When evaluating a decision, ask: What decision alternatives are available? What individuals or organizations have a stake in the outcome of my decision? Will an individual or an organization be harmed by any of the alternatives? Which alternative will the most good with the least harm? Would someone I respect find any of the alternatives objectionable? Slide 1-31 Learning objective 8: Describe a framework for ethical decision making After deciding on a course of action, but before taking action, ask: At a gut level, am I comfortable with the decision I am about to make? Will I be comfortable telling my friends and family about this decision? Slide 1-32 Learning objective 8: Describe a framework for ethical decision making • Professional organization which focuses on management accounting:     Slide 1-33 Developed Statement of Ethical Professional Practice Maintains ethics helpline Publishes Strategic Finance and Management Accounting Quarterly Conducts comprehensive examination to test knowledge of management accountants Learning objective 8: Describe a framework for ethical decision making • Controller • Prepares reports to plan and evaluate company activities • Provides information needed to make management decisions • Files all financial accounting reports and tax filings with IRS and other tax agencies • Coordinates activities of external auditors Slide 1-34 Learning objective 9: Discuss the duties of the controller, the treasurer, the chief information officer, and the chief financial officer • Treasurer  Manages cash and marketable securities  Prepare cash forecasts  Obtains financing from banks and other lenders  Maintain relationships with investors, banks, and other creditors Slide 1-35 Learning objective 9: Discuss the duties of the controller, the treasurer, the chief information officer, and the chief financial officer • Chief Information Officer (CIO)  Responsible for information technology and computer systems • Chief Financial Officer (CFO) • Responsible for accounting and finance operations Slide 1-36 Learning objective 9: Discuss the duties of the controller, the treasurer, the chief information officer, and the chief financial officer Organizational Chart for the Controller’s Office Slide 1-37 Learning objective 9: Discuss the duties of the controller, the treasurer, the chief information officer, and the chief financial officer Slide 1-38 Copyright © 2010 John Wiley & Sons, Inc All rights reserved Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc The purchaser may make backup copies for his/her own use only and not for distribution or resale The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein Slide 1-39 ...CHAPTER Managerial Accounting In the Information Age Slide 1-2 Managerial Accounting  Managerial accounting is designed for internal users  The goal of Managerial Accounting is to... Describe how performance reports are used in the control process Managerial vs Financial Accounting  Unlike Financial Accounting, Managerial Accounting:     Is directed at internal users May deviate... planning, control, and decision making Two Key Ideas in Managerial Accounting Slide 1-21 Learning objective 6: Explain the two key ideas in managerial accounting Incremental Analysis • Incremental analysis: