Chapter 18

Strategic Management Accounting

In this final chapter we bring together some of the concepts that have been developed in Part III, and look strategically in three ways. First, we show how non-financial performance measurement and a concern with business processes have extended the ambit of accounting beyond purely financial numbers. Second, we look beyond the narrow accounting period to a long-term view of the organization. Third, we look beyond the organizational boundary to see its role in the supply chain.

In this chapter, we look first at what is meant by strategic management accounting. We then look at the specific accounting techniques that can be used within the umbrella of strategic management accounting.

Strategic management accounting

In Chapters 4 and 5 we looked at management control, in which management accounting plays a considerable role. From the strategic management accounting perspective, the definition of management control systems has evolved from a focus on formal, financially quantifiable information and now includes external information relating to markets, customers and competitors; non-financial information about production processes; predictive information; and a broad array of decision support mechanisms and informal personal and social controls (Chenhall, 2003).

In their book Relevance Lost, Johnson and Kaplan (1987) argued that management accounting and control systems could not cope with the information demands of the modern manufacturing ...

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