Creating Value in Accounting: Strategies for Sustainable Success

School: Haverford College - Course: ECON 201 - Subject: Accounting

1) Accounting is expected to 'create value' to an organization. In this regard: What might we mean by create value? - Strategic management accounting is about creating 'sustainable' value. It does this by supporting the strategy process with analytical tools and by providing useful information for managers so they can make effective decisions. - The role of Accountant: + Framing business model => Sets objectives + Promote value add approach + Encourages long-term sustainability + Encouraging and rewarding the right behaviors => Allocate resources to ad values + achieve goals +Ensuring decisions are supported by necessary information, analysis and insights => Undertake analysis + Prepare forecast + Ensuring that monitoring and reporting performance go beyond the traditional ways of thinking about economic success => Set KPI + Measure + Reporting => Accounting adds value by assisting shareholders in better understanding the management's job (planning, organizing, making decisions, and monitoring) + Delivering manager goals in a sustainable manner + Identify some information that would be useful for management purposes but would not be disclosed externally because of potential damage to any commercial advantage + Business success depends on adding sth news + Efficient recording + transformation of data into knowledge -> better decision making Investment Pricing Short term strategy Long-term strategy Manufacturing levels Buy/Sell business segment Build New product facility 2)Identify some information that would be useful for management purposes but would not be disclosed externally because of potential damage to any commercial advantage -Embezzlement within the company Consequences: + Disrupt operations + Erosion of Trust + Net losses

Example:Overcharging clients is a common low-level type of embezzlement. Customers may be turned off, the company may appear inept, and the items or services may be misrepresented. Not public the information will prevent the customers to lose trust in the company + prevent the stock price from falling + takes appropriate action before the government finds out and has to pay millions of dollars in compensation (for taxes for instance) Help managers to handle the root cause without waking a sleeping dog. - The high turn over rate => The company does not want to make this information public because it could lower the number of candidates as well as imply a poor working environment or late salary payments. Intellectual property (competitors don't know) Contractual details with vendors and customers => Pay less -> competitors hate Innovative research Specific employee reward and recognition systems to keep people Retain / Replace technology