Management Accounting and Control: Tools and Concepts in a Central European Context

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Management accounting has been the basic toolbox in business administration for decades. Today it is an integral part of all curricula in business education and no student can afford not to be familiar with its basic concepts and instruments. At the same time, business in general, and management accounting in particular, is becoming more and more international. English clearly has evolved as the "lingua franca" of international business. Academics, students as well as practitioners exchange their views and ideas, discuss concepts and communicate with each other in English. This is certainly also true for management accounting and control.
Management Accounting is becoming more and more international. ?Management Accounting and Control? is a new textbook in English covering concepts and instruments of management accounting at an introductory level (primarily at the Bachelor level, but also suited for general management and MBA courses due to a strong focus on practical relevance). This textbook covers all topics that are relevant in management accounting in business organizations that are typically covered in German and Central European Bachelor courses on management accounting and control.
After a general introduction to the field of management accounting and control the book discusses cost management as an extension of cost accounting. Typical cost management instruments such as target costing, life cycle costing and process–based costing approaches are explained in detail. Differences between Anglo–American activity–based costing (ABC) and German process–based costing are highlighted. The book then turns to an extensive discussion of planning and budgeting tasks in management accounting with a strong focus on the practical application of the topic such as developing a budget in practice. Another chapter is dedicated to a comparison of traditional budgeting with modern /alternative budgeting approaches.
A major part of the book is dedicated to the broad area of performance management. The relevance of financial statement information for performance management purposes is discussed in detail. In addition, the most widely spread financial performance indicators are illustrated using real–world examples. The book also includes detailed content on value–based management control concepts. In a consecutive chapter, performance measurement is linked with strategy while extensively discussing the Balanced Scorecard as a key tool in strategic performance management.
The remaining parts of the book deal with management reporting as one of the main operative tasks in management accounting practice. The book closes with insight into new fields and developments that currently influence management accounting practices and research and promise to play an increasingly important role in the future.
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ISBN-13: 9783527508211
ISBN-10: 352750821X
Pagini: 350
Dimensiuni: 171 x 249 x 21 mm
Greutate: 0.70 kg
Editura: Wiley Vch
Locul publicării: Weinheim, Germany

Public țintă

– Students of programs covering management accounting run in English at universities in German speaking countries (GER, AUS, CH),
– Students of programs run in English language at universities in other non–English–speaking countries (e.g. Scandinavia, Eastern Europe, Asia), who are looking for an alternative to the classical US–focused management accounting textbooks,
– Practitioners in multinational corporations engaged in work in Germany / Central Europe,
– Non–German readers interested in understanding European concepts of management accounting in contrast to the Anglo–American approach of management accounting.


Preface xiii
CHAPTER 1 Introduction to Management Accounting and Control  1
The Concepts of Management, Accounting, and Control   2
A Definition of Management    2
A Definition of Accounting    3
A Definition of Control 4
Bringing it Together: Management Accounting and Management Control   5
Management Accounting   5
Management Control   6
The Role of a Controller in an Organization   9
Skill Set of a Controller    10
The Management Control Function in a Corporation    12
Management Accounting vs. Financial Accounting     14
Financial Accounting      14
Contrasting Management Accounting and Financial Accounting    15
Performance Measurement and Performance Reporting   17
An Example of Performance Reporting        17
Performance Measurement beyond Financials 19
Trends in Management Accounting and Control      20
Ethical Aspects of Management Accounting and Control 23
CHAPTER 2 Management Reporting      29
Information Needs in Business   30
What is Information ?  31
Information Supply vs. Information Demand  32
Management Reporting as a Key Information Tool  34
Scope and Definition of Management Reporting 35
The Management Reporting Process   36
Management Reporting Dimensions   38
What For? Management Reporting Purposes 40
  What? Content of Management Reports       42
Inductive Methods 42
Deductive Methods 43
Information Sources        44
How? Preparing and Communicating Management Reports       46
Amount of Information      46
Order and Structure        47
Relationships between Pieces of Information       49
Presentation and Visualization    50
When? Timing Issues in Management Reporting    50
Reporting Cycles      50
Duration of Report Preparation  51
Timeliness and Punctuality        52
Who? Parties Involved in the Management Reporting Process       53
Emerging Trends in Management Reporting       54
Reporting Factories        54
Self–Reporting      55
Cooperative Reporting      56
CHAPTER 3 Managing Cost   61
Cost Management        62
Cost Accounting vs   Cost Management  62
The Focus of Cost Management  63
Cost Management Tools      65
An Overview   65
Problems of Volume–Based Cost Allocation  65
Activity–Based Costing and Process–Based Costing    67
How Activity–Based Costing Works   67
How Process–Based Costing Works   70
Activity–Based Costing and Process–Based Costing a Comparison       71
Process– and Activity–Based Management Control    73
Cost Reduction and Process Efficiency Improvements       74
Pricing and Product Mix        74
Product and Service Design      74
Planning and Budgeting        75
Target Costing        75
Determining the Cost Gap in Target Costing    76
The Target Costing Process      77
Splitting Target Cost into its Sub–Values    79
Target Cost Index and Target Cost Diagram  81
A Critical Reflection: When is Target Costing Appropriate?       82
Life Cycle Costing        83
Cost and Revenue Elements Across the Product Life Cycle       85
Contribution Margin Method of Life Cycle Costing    86
Discounting Method of Life Cycle Costing  88
A Critical Reflection: What Life Cycle Costing Can and Cannot Do     91
CHAPTER 4 Budgeting  97
Planning in Management Control      98
The Budgeting Cycle      100
Uses of Budgets      101
The Master Budget        102
Preparing an Operating Budget      104
The Revenue Budget      105
The Production Budget      106
The Direct Materials Budget    107
The Direct Labor Budget      108
The Manufacturing Overhead Budget    108
The Manufacturing Costs Per Unit   109
The Cost of Goods Sold Budget    110
The Non–Manufacturing Costs Budgets    111
The Budgeted Income Statement   112
Discussing the Operating Budget      113
Preparing a Financial Budget      114
The Cash Budget      114
Preparation of the Cash Budget  115
The Budgeted Cash Flow Statement   118
Discussing the Cash Budget and the Budgeted Cash Flow Statement     119
Motivational Aspects of Budgeting  121
Motivation Versus Planning      122
Top–Down versus Bottom–Up Budgeting       123
Budget Manipulation      125
Strengths and Weaknesses of Traditional Budgeting       126
The Strengths of Budgets      126
The Weaknesses of Budgets      127
CHAPTER 5 Alternative Approaches to Budgeting       133
Budgeting Necessary Evil or Valuable Management Tool?       134
Overview of Alternative Budgeting Approaches       134
Approaches Complementing Traditional Budgeting    135
Incremental Budgeting      135
Setting Up a Zero–Based Budget  138
Zero–Based Budgeting Example  139
Activity–Based Budgeting      141
Activity–Based Budgeting Example   142
Improvement Approaches to Budgeting   144
Better Budgeting      144
Continuous Improvement ( Kaizen ) Budgeting  146
Abolishing Budgets The Beyond Budgeting Approach    147
CHAPTER 6 Performance Measurement Financial
Statements    153
The Importance of Performance Measurement    154
Measuring Financial Performance   156
Sources of Financial Information  156
The Balance Sheet      157
Five Major Elements of the Balance Sheet  158
Non–current Assets        159
Current Assets        162
Non–Current Liabilities      162
Current Liabilities    163
Owners Equity        163
Market Values Versus Book Values   163
Important Balance Sheet Concepts  164
Total Assets      164
Financial Debt      165
Identifying Financial Debt    166
Net Debt        167
Net Working Capital      170
Capital Employed    172
The Income Statement        173
The Multi–Step Profit Cascade        176
Earnings Before Taxes (EBT)      177
Earnings Before Interest and Taxes (EBIT)  178
Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)     179
The Statement of Cash Flows      180
Preparing a Statement of Cash Flows   182
Sources and Uses of Cash      182
Determining Cash Flow with the Indirect Method       183
Cash Flows from Operating Activities    184
Cash Flows from Investing Activities   186
Cash Flows from Financing Activities   187
Analyzing the Statement of Cash Flows  189
Change in Net Working Capital    191
CHAPTER 7 Performance Measurement
Key Performance Indicators   199
Performance Indicators      200
A Note of Caution      202
Financial Ratios      203
Profitability Ratios        205
Profit Margin        205
EBIT Margin (Return on Sales)      207
Gross Profit Margin        207
Return on Investment Ratios    208
Return on Equity (ROE)      209
Return on Assets (ROA)        209
Return on Capital Employed (ROCE)   210
A Note on the Time Dimension      211
Asset Management Ratios      213
Total Asset Turnover      213
Fixed Asset Turnover      214
Inventory Turnover        215
Days Sales in Inventory (DSI)      215
Days Receivables Outstanding (DRO)    216
Days Payables Outstanding (DPO)   217
Cash Conversion Cycle        217
Days Working Capital (DWC)      218
A Comparison        220
Capital Structure and Financial Leverage Ratios       222
Total Debt Ratio      222
Debt–to–Equity Ratio      224
Equity Multiplier      224
Interest Coverage and EBITDA–to–interest Ratio    224
Net Debt–to–EBITDA      225
Financial Leverage        228
Calculating the Leverage Effect    230
Liquidity Ratios      231
Current Ratio        232
Quick Ratio        232
Cash Ratio   233
Systems of Performance Measures  233
The DuPont System        234
Non–Financial Performance Measures   237
Typical Performance Measures in Logistics    237
Delivery Reliability      237
Supply Chain Cycle Time        238
Replacement Time      238
Typical Performance Measures in Human Resource Management       238
Employee Satisfaction    239
Absenteeism Rate        239
Staff Fluctuation Rate    239
Typical Performance Measures in Manufacturing    240
Productivity      240
Capacity Utilization        240
Reject Rate        241
Throughput Time    241
Typical Performance Measures in Marketing  241
Customer Churn Rate    241
Click Through Rate (CTR)      242
Price Elasticity of Demand    242
Using Performance Measures in Business  243
Time Trend Analysis        243
Peer Group Analysis (Benchmarking)   244
A Benchmarking Example      245
Problems of Benchmarking        247
Major Criticism of Key Performance Indicators    247
CHAPTER 8 Value–Based Performance Measurement       257
The Goal of a Business Firm        258
Shareholder Value as the Overall Goal   260
A Justification of Shareholder Value   261
Shareholders vs   Stakeholders    263
Shortcomings of Traditional Performance Measures       264
Measuring the Creation of Shareholder Value  265
Residual Income      266
Economic Value Added (EVA)    267
The EVA Formulas        267
Net Operating Profit After Taxes (NOPAT)  269
Capital Employed (CE)        269
Return on Capital Employed (ROCE)   271
Weighted Average Cost of Capital (WACC)  271
Cost of Equity        272
A Numerical Example of Calculating EVA    274
EVA Adjustments        277
Using EVA as a Superior Performance Measure    278
Three Competing Metrics      278
The Underinvestment Problem of ROCE    279
Ways to Increase EVA The Value Driver Tree  282
Portfolio Management Decisions with EVA    286
Criticism of EVA      289
Alternative Value Concepts        290
Economic Profit        290
Cash Value Added        291
Market Value Added      293
Value–Based Management Systems  294
CHAPTER 9 Strategic Management Accounting
and the Balanced Scorecard   303
Strategic vs   Operating Management Accounting    304
Phases in the Strategic Management Process and the Role of the Controller   307
Finding and Formulating a Strategy   307
Implementing a Strategy        308
Corporate–Level Strategies vs   Business–Unit Level Strategies     309
Corporate–Level Strategies      310
Business–Unit Level Strategies    311
Selected Instruments of Strategic Management Accounting    312
External vs   Internal Factors      312
Environmental Analysis        313
Industry Analysis Porter s Five–Forces Model  315
Generic Strategies        317
Value Chain Analysis      318
Product Life Cycle Analysis        319
BCG s Portfolio Matrix        321
SWOT Analysis        323
The Balanced Scorecard      326
Genesis of the Balanced Scorecard   327
Key Characteristics of the Balanced Scorecard    328
Structure of a Balanced Scorecard   329
Financial Perspective      331
Customer Perspective        332
Internal Business Process Perspective  332
Learning and Growth Perspective (Innovation and Learning)       334
Cause–and–Effect Links      335
The Strategy Map    335
Features of a Balanced Scorecard   337
Developing a Balanced Scorecard    339
Step 1: Formulate the Strategy and Clarify the Strategic
Objectives Along the Perspectives  339
Step 2: Set up the Strategy Map    340
Step 3: Define Measures for the Strategic Objectives    341
Step 4: Define Initiatives and Responsibilities for Each Objective    341
Step 5: Feedback and Continuous Improvement  342
The Balanced Scorecard as a Strategic Management System    342
Application in Corporate Practice    345
Criticism of the Balanced Scorecard   347
CHAPTER 10 New Developments in Management
Accounting and Control  355
Hot Issues and Future Challenges in Management Accounting     356
Management Accounting in Networks and Supply Chains     357
Management Accounting for Quality Six Sigma  359
The Role of Management Control in Six Sigma  361
Six Sigma in Practice        362
Integrating Human Behavior into Management Accounting    363
Environmental Management Accounting    366
Integrated Reporting    368
Integrating Financial and Management Reporting       370
The Integrated Reporting (IR) Framework  371
Management Accounting and Control with Big Data       372
The Role of the Controller in Big Data   374
A Critical View on Big Data        375
Bibliography        381
Index     387

Notă biografică

Both authors hold chairs and teach at the ESB Business School, Reutlingen University. They have been researching and teaching in the field of management accounting for many years.
Michel Charifzadeh holds a diploma in business administration from the Ludwig–Maximilians University Munich and received his doctoral degree from the EBS Universität für Wirtschaft und Recht, Oestrich–Winkel. He has worked as a project manager in mergers & acquisitions at Siemens AG for several years. As a professor of finance and accounting he was employed at the International University of Bad Honnef–Bonn before he was appointed to the ESB Business School at Reutlingen University in 2011. His teaching and research interests include value based management, performance measurement, company valuation and International Financial Reporting Standards (IFRS).
Andreas Taschner holds a diploma and a doctoral degree from the Wirtschaftsuniversität Wien (Vienna University of Economics and Business). He has more than 10 years of industry experience. He was appointed professor of management accounting at the ESB Business School at Reutlingen University in 2011. His teaching and research interests include comparative management accounting, management reporting, investment appraisal techniques, and supply chain accounting.