Topic 4 Setting the scene

Question 1

The separation between management accounting and financial accounting

Answer 1

In this course we will not provide an artificial delineation
between management accounting and financial accounting. This separation is artificial: Product ‘cost’ has relevance to stakeholders inside and outside the organisation. Planning occurs before we report the results: Discussing financial accounting prior to other aspects of ‘accounting’ seems to be inconsistent with reality. Much of the information that is necessary for managing a
business also has relevance to stakeholders not directly
involved in the management of the organisation.

Question 2

Information about the following might be relevant to both internal and external stakeholders:

Answer 2

• The organisation’s actual and projected performance.
• The organisation’s control of resources.
• The organisation’s resource usage.
• Organisational impacts.
• Compliance with organisational goals, regulations and/ or
particular stakeholder expectations.
• Implications of future plans, and so forth, on various
stakeholders including ‘the environment’.

Question 3

5 Steps in the cycle of management (what does a manager do)

Answer 3

Plans
Organises 
Makes decisions 
Monitors performance 
Revises

Question 4

Plans

Answer 4

What does the organisation want to do/achieve?

Question 5

Organises

Answer 5

How does the organisation achieve its goals and

plans?

Question 6

Makes decisions

Answer 6

Determining the best course of action from amongst alternatives.

Question 7

Monitors Performance

Answer 7

How is the organisation doing, relative to what it wanted to achieve?

Question 8

Revises

Answer 8

Revises plans in light of performance: (and the cycle continues.)

Question 9

The accountants role in planning

Answer 9

Framing business models.
Challenging conventional
assumptions of doing business
and redefining success in the
context of achieving sustainable value creation.

Question 10

What the accountant does in regards to planning

Answer 10

Sets objectives.
Encourages long-term
sustainability (vs. short-term
approach).
Promotes a value added
approach.

Question 11

Planning

Answer 11

‘Planning’ is central to managing a business. Planning should be a continuous process which should start well before an organisation commences operations. The plan provides a benchmark against which future
performance can be assessed.

Question 12

Key planning factors to consider

Answer 12

Mission

Resources

Stakeholder expectations

Technologies

Economic, social, environmental implications

Regulations (existing and projected)

Question 13

The continual process of planning

Answer 13

Plans need to be implemented with related activities
(and ‘costs’) being monitored and controlled for
compliance with standards/ goals that were established
and opportunities for improvement to processes
need to be continuously considered. Previous plans can be revised, and new plans
established. Feedback from interested stakeholders can also be used.

Question 14

Planning non-financial and long term

Answer 14

Managers and accountants need to extend the focus of performance beyond the ‘financial’ and think about the ‘long term’. The need for short-term results can distract
managers from their long-term visions. Defining the long-term and embedding it into
operations in a meaningful way can be complex.

Question 15

Planning for value creation

Answer 15

An organisation would be expected to create ‘value’ for various stakeholders. The value creation should ideally occur in an ecologically and socially sustainable and responsible manner. Value creation requires clear vision, strategy, and planning. Value creation relies upon well functioning corporate
governance.

Question 16

Porter’s value chain

Answer 16

Porter (1985) describes the sequence of activities undertaken by an organisation as a ‘value chain’. Well performing organisations create relatively more value from the
various steps involved in acquiring and transforming resources into products and
services.

INBOUND LOGISTICS
OPERATION
OUTBOUND LOGISTICS
SALES AND MARKETING 
SERVICING

Question 17

4 support activities in the value chain

Answer 17

Admin, finacne infrastructure

Human resources management

Product & Tech development

Procurement

Question 18

Output of the value chain

Answer 18

Value added, decreased costs, better profit margin

Question 19

Inbound logistics

Answer 19

E.g. quality control, receiving, raw materials control, supply schedules

Question 20

Operation

Answer 20

E.g. manufacturing, packaging, production control, quality control, maintenance

Question 21

Outbound logistics

Answer 21

E.g. finishing goods, order handling, dispatch, delivery, invoicing

Question 22

Sales & marketing

Answer 22

E.g. customer management, order taking, promotion, sales analysis, market research

Question 23

Servicing

Answer 23

E.g. warranty, maintenance, education and training, upgrades

Question 24

Admin, finacne infrastructure

Answer 24

E.g. legal, accounting, financial management

Question 25

Human resources management

Answer 25

E.g. personnel, lay recruitment, training, staff planning

Question 26

Product & Tech development

Answer 26

E.g. product and process design, production engineering, market testing, R&D

Question 27

Procurement

Answer 27

E.g. supplier management, funding, subcontracting, specification

Question 28

What roles do professional accountants in business perform?

Answer 28

* As creators of value * As enablers of value * As preservers of value * As reporters of value

Question 29

5 components of an organisations plan

Answer 29

* Overview/description * Financial Plan * Marketing Plan * Social and environmental management plan * Operation plan

Question 30

The accountants role in organising

Answer 30

Encouraging and rewarding the right behaviours.

Question 31

What the accountant does in regards to organising

Answer 31

Allocates resources to add value and achieve goals. Structures incentives to align behaviour with organisational goals

Question 32

Organising: 5 factors that influence value creation

Answer 32

* Culture and leadership styles in place. * Management’s willingness to collaborate. * Preparedness to be innovative. * The level of efficiency being embraced. * Awareness of market opportunities and changes therein.

Question 33

Organising - value drivers and resource allocation

Answer 33

The determination of what influences value will in turn impact The way resources are used and The way performance and resource usage is measured and associated rewards are determined.

Question 34

Organising - value drivers

Answer 34

According to IFAC (2011) there are eight drivers of sustainable organisational success, that provide the basis for understanding how the global accountancy profession needs to support the development of professional accountants, so that they can help organisations achieve sustainable value creation.

Question 35

8 value drivers

Answer 35

Customer/stakeholder focus Leadership and strategy Integrated governance, risk, control Innovation and adaptability Financial management People and talent management Operational excellence Effective and transparent communication

Question 36

Customer/stakeholder focus

Answer 36

Understanding and satisfying customer or service user needs. Aligning all parts of an organisation to these needs

Question 37

Leadership and strategy

Answer 37

Providing ethical and strategic leadership focused on sustainable value creation. Enabling key performance enablers including strong corporate values, ethical culture and organisational structures and processes

Question 38

Integrated governance, risk, control

Answer 38

Deploying affective governance structures and processes with integrated risk management and control systems. Balancing performance and conformance in governance

Question 39

Innovation and adaptability

Answer 39

Innovating processes and products to improve reputation and performance. Adapting the organisation to changing circumstances

Question 40

Financial management

Answer 40

Insuring financial leadership and strategy support sustainable value creation. Implementing good practices in areas such as tax and Treasury, cost and profitability improvement and working capital management

Question 41

People and talent management

Answer 41

Enabling people and talent management as a strategic function. Applying talent management to the finance function so better service the needs of the wider organisation

Question 42

Operational excellence

Answer 42

Aligning resource allocation with strategic objective and the drivers of shareholder and stakeholder value. Supporting decision-making with timely and insightful performance analysis

Question 43

Effective and transparent communication

Answer 43

Engaging stakeholders effectively to ensure that they receive relevant communications. Preparing high-quality business reporting to support stakeholder understanding and decision-making

Question 44

Enablers of Value

Answer 44

As enablers of value, by informing and guiding managerial and operational decision making and implementation of strategy for achieving sustainable value creation, and the planning, monitoring, and improvement of supporting processes.

Question 45

Preservers of value

Answer 45

As preservers of value, by ensuring the protection of a sustainable value creation strategy against strategic, operational, and financial risks, and ensuring compliance with regulations, standards, and good practices.

Question 46

Reporters of value

Answer 46

As reporters of value, by enabling the transparent communication of the delivery of sustainable value to stakeholders’.

Question 47

Creators of value

Answer 47

As creators of value, by taking leadership roles in the design and implementation of strategies, policies, plans, structures, and governance measures that set the course for delivering sustainable value creation.

Question 48

Accountants as part of the management team

Answer 48

Accountants are effectively ‘gatherers’ of information. Professional Accountants are trained in the discipline of collecting relevant information and compiling reports/’accounts’ that create value to the organisation

Question 49

Professional accountants in all organizations have a significant role in:

Answer 49

− Faming business models; − Challenging conventional assumptions of doing business and redefining success in the context of achieving sustainable value creation; − Encouraging and rewarding the right behaviours; − Ensuring that decisions are supported by the necessary information, analysis, and insights; − And ensuring that monitoring and reporting performance go beyond the traditional ways of thinking about economic success.