The Impact of Globalization on Management Accounting

With a movement towards globalization approaching, the change bought on by it can change how companies in the US view their accountants. First, there are two types of accountants, financial accountants and administrative accountants. A definition of financial accounting, taken from Merriam-Webster, is the systematic analysis of information about the economic affairs of an organization for the use of persons outside the organization. Merriam-Webster goes on to explain management accounting as "the creation of reports for planning and decision-making" … "It's aim is to provide managers reliable information on the costs of operations and on standards with which those costs can be compared, To assist them in budgeting ". The key difference to take away from these two definitions is that financial accounting provides information to people outside of the organization, and management accounting is aimed at helping managers within an organization make decisions.

The US becoming more globalized will increase competition for firms within the country, therefore making management accountants more valuable to firms. To understand what an increase in competition will do to US companies and their accountants, one must first take a look at how companies in the US see management accountsants in comparison to another country. In a research article titled "Management Accounting Practices in the US and Japan: Comparative Survey Findings and Research Implications (1991)" by M. Shields and C. Chow, notes the difference in goals set by US and Japanese accountants. The survey suggests that US accountants "emphasize the use of standards to control manufacturing costs after the fact", while contrasting Japanese accountants use practices that look towards the future. This difference here lies within the goals set by the companies. While firms in the US are looking at what they can do now to lower costs, Japanese firms are looking into the future to lower costs for products that might not exist yet. This type of thinking for US firms is not acceptable, and the state that companies are in now is less than satisfactory because the current state of management accounting is in the wrong direction.

Management accountants look toward the future, they set up budgets, forecast, and steer companies in the right progressive direction. In increased competition, especially for US firms, companies will need managers that make the right decisions for the good of the company. In an article by B. Pounder, "How Globalization is Affecting US Accounting (2006)", Pounder states that one of the main reasons management accounting is obscure in this country is because American managers are more likely to make "gut feeling" choices ( Usually for personal gain) rather than making the choices that will be good for the company in the long run. This can be tied back to the research survey from Shields & Chow, looking at firms and their respective goals. It is more common for businesses in the US to demonstrate action for personal gain than it is in Japan, and in an age of globalization and increased competition companies can not survive with that type of mindset and framework.

A report by N. Miculescu, "Current Trends of Production Cost Accounting (2011)", Miculescu concluded that companies have an exponentially growing duty to find solutions as quickly as possible in order to keep up with this rise in competition due to globalization.

The current state of management accounting in the US rewards managers and puts the company as a whole in jeopardy, and with a rise in competition approaching is it in firms' best interests to employ management accountsants that make decisions for the best interest of the company.

Source by Graham Huff

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