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In this age of globalisation, while it is absolutely necessary for large listed companies in different countries to prepare fina - Essay Example

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In this age of globalisation, while it is absolutely necessary for large listed companies in different countries to prepare fina

It focuses on effective use of the resources in a dynamic and competitive environment. Therefore, management accounting is concerned with resource management for facilitating decision making in an organization in tune with the changes continuously taking place due to various factors which may be internal or external to the business. International Financial Reporting Standards have not been developed with a view to report management decision making or management control. However, changes in the technology sphere, especially information technology enabled development of Management Accounting Software involving complex analysis of the business situations for the purpose of making strategic management decisions. Globalization and liberalization of the economies calls for uniformity and standardization in various fields for easy dissemination of information. Therefore, the need for uniformity in management policies, procedures and methods of applications of management techniques will eventually lead to incorporation of management accounting in IFRS over a period of time. Evolution of standards The developments taking place in the businesses are accepted slowly and shaped up by the conventions followed in the society or country in the early stages. These principles undergo various judicial tests in the evolutionary process before passing through the legislature. Therefore translation of the management accounting concepts into International Financial Reporting Standards will take time, since management accounting is relatively new compared to financial accounting which has been followed by the business for many centuries. There are differences in its adoption even in the developed countries. For instance, “there are many major differences between IFRSs and the standards issued by FASB (USA), although efforts are underway to remove them to ensure convergence” (Banerjee, 2010, p. 685). For example, the practical considerations such as adoption of current value for the purpose of valuation of say, land or properties will be relevant in decision making process, whereas under GAAP it is required to be stated at historical cost in the financial reports. The transitional process from GAAP to IFRS in US is expected to begin in 2014. The adoption of Management accounting in developing countries is still restricted only to the larger companies. Therefore, accounting bodies of these countries are not in a hurry to push forward the cause of management accounting at this stage. The adoption of management accounting practices by an organization is a prerequisite for management accounting reports, and it will happen only when the benefits are appreciated at the company level and the cost of operating a suitable system in respect of collection and analysis of data is reasonable and consistent with the benefits derived. Impact of IAS and IFRS on Management Accounting Prochazka and Ilinitchi (n.d.) state “The implementation of IFRS into Czech legislation has brought new quality to financial reporting. Due to their usefulness, IFRS infiltrate into management accounting systems. In fact, in many companies IFRS carry out (satisfy, meet) the function of internal management accounting (with some modification allowing better internal performance evaluation).” However, it is restricted to certain disclosures where information available from the financial accounts is not adequate. The level of integration of financial and management accoun ...Show more

Summary

IFRS and Management Accounting Reports Introduction The importance of management accounting has been increasingly recognized by the industries over the period of time. Management account forms the basis for taking strategic management decisions by the businesses…
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In this age of globalisation, while it is absolutely necessary for large listed companies in different countries to prepare fina essay example
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