Today

Account

by Orla Feeney and Bernard Pierce

With ever increasing competitive pressures in the marketplace for most organisations, a
regular supply of relevant management accounting information is arguably more
important than ever. There is a growing body of writing that voices heavy criticism of
management accountants (iVIAs) and even suggests that many managers now resort to
preparing their own financial information. However, there is a severe shortage of evidence
gathered directly from managers regarding their information requirements and how well
suited they perceive IVIAs to be for providing information that meets those requirements.
Oria Feeney and Bernard Pierce report on recent research that examined the issue
through a series of interviews with managers in 18 Irish companies.

In other disciplines such as MIS, user
satisfaction is a well recognised
measure of information quality. It
therefore seems important that if the
alleged shortfall in management
accounting information is to be
addressed, some attempt should be
made in the first instance to ascertain
the views of the managers who use
the information. This article
summarises some findings from a
recent research study carried out in
Ireland that focused on how managers
describe the information they require
and how they characterise those MAs
that are best qualified to deliver it.
Bean Counter
Business
The role of the MA has traditionally
been characterised as concentrating
on two main areas - one focused on
monitoring, control and
scorekeeping, and the other on
supporting managerial decision-
making (DM) and assisting in
problem-solving. Developments in
the business environment have
altered the dynamics of these two
broad aspects of the role, with the
result that today's MA is responsible
for providing an increasingly wide
range of information. The
accounting literature argues that
contributing to control in today's
environment involves putting
financial numbers in a strategic
context and relating non-financial
results to strategic objectives.
Contributing to DM requires the MA
to be strategically aware, with
sufficient business knowledge to be
able to advise management in the
context of particular decisions. A
clear implication is that MAs must be
able to furnish 'softer' accounting
information in addition to 'hard'
financial data. They must
incorporate qualitative, non-financial
details which better enable managers
to relate financial performance to
success or failure in the competitive
marketplace. Alongside sales margins
and bottom lines, one might now
expect to see the MA reporting such
items as production times, customer
satisfaction feedback and employee
turnover. The traditional MA is
presented as a 'bean counter' who
cannot relate to the business, lacks
initiative and creativity, and
encourages sub-optimal decisions. In
contrast, the contemporary MA is
expected to consistently demonstrate
a strong business understanding as
well as broad-based personal skills
and commercial capabilities.'
This contemporary MA has been
described as a 'hybrid' accountant
who assists managers in maintaining
effective control, while also
performing as a 'business partner' as
part of the management team.
Candidates for these two broad roles
might differ significantly in their
academic orientation, their skills,
attributes and competencies, their
time orientation and their scope of
work.^ The question has therefore
been raised as to whether one person
can occupy a role akin to that of
policeman or umpire and
simultaneously be an active
participant in the DM process.'

161 Accountancy Ireland October 2007 Vol.39 No. 8

 information from their MAs. There
Table 1: Importance of characteristics of (a) control information and was evidence that some MAs are relied
(b) DM information
upon primarily for their financial
Characteristics of Control Information DM Inforination input and that their managers often
source the broader scoped information
Information Mean Importance Rank Mean Importance Rank
elsewhere ('From the MA, I require
Relevance 4.78 1 4.89 1 three key pieces of informational
output - my controllable lines. That's
Reliability 4.50 2 4.56 2 all I'm interested in from a
4.44 3 management accounting perspective.
Accuracy 4.06 4
If those things are reported
Consistency 4.00 4 3.56 8 adequately, that would be everything I
am concerned about').
Flexibility and 3.89 5 3.89 5
Adaptability

Timeliness 3.56 6 4.28 3 How do Managers rate

Aggregation 3.44
Scope 3.11
For the purposes of this study,
interviews were conducted with 18
managers in 18 different companies in
Ireland. They were asked a series of
questions regarding how they would
characterise the information they need
and the MAs who are best qualified to
supply it. In order to get a sense of the
perceived importance of various
characteristics and traits, a scale of 1 to
5 was used, where 1 signified not
important and 5 extremely important.
MAs' actual performance was rated on
a similar scale of 1 to 5, where 1
signified bad and 5 excellent.
7 3.56 7
8 3.78 6 the information they currently
more important for DM, while
accuracy and consistency were ranked
as more important for control (a
typical quote was: 'With regard to
control or historical information,
timeliness is somewhat important but
it's not paramount. However, for DM
purposes I can tolerate far less accuracy
as long as timeliness is improved').
While the quantitative ratings
revealed that scope was considered
significantly more important in DM
information, more detailed discussions
with the managers indicated that not
all managers expect broad scoped
Existing Information?
The managers were requested to rate
receive from their MA, based on the
eight specified characteristics. The
average ratings are shown in the
second column of Table 2. The third
column shows managers' perceptions
of the importance of each
characteristic regarding control
information as reported in Table 1
and the fourth column shows the
difference between actual and
importance ratings. The final two
columns show the same details for
DM information.
Table 2 indicates the extent to which
MAs are providing information which
meets the needs of managers and the
results indicate that MAs are falling

What Type of Table 2: Rating by managers of actual information characteristics compared

Information do with desired characteristics
Managers Want?
Control Inforination DM Information
The managers were presented with a Characteristics
list of eight specified information of Mean Mea Mean
characteristics and requested to Information Actual Imp
Importance Difference* Importance Difference*
indicate their rating of the
importance of each in the context of Accuracy 3.78 4.44 -0.66 4.06 -0.28
information provided by their MA. Consistency 3.78 4.00 -0.22 3.56 +0.22
Average ratings are reported in Table
1, showing values for control ReliabiUty 3.72 4.50 -0.78 4.56 -0.84
information and DM information. Timeliness 3.72 3.56 +0.16 4.28 -0.56
The managers valued relevance and Aggregation 3.33 3.44 -0.11 3.56 -0.23
reliability above all else, in both
control and DM information, but the Relevance 3.22 4.78 -1.56 4.89 -1.67
dominant message from this table is Flexibility and
the importance attached to different 3.00 3.89 -0.89 3.89 -0.89
Adaptability
information characteristics depending
on whether the information is required Scope 2.67 3.11 -0.44 3.78 -1.11
for control or DM. Timeliness and
scope were considered significantly * +/- = MAs' actual rating exceeds/falls below managers' expectation

Accountancy Ireland October 2007 Vol.39 No. 5

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o o o o o o o i s o e Q ) 0 0 o o o o o o o o o o o o o o e o o o o o e o e o o o Q 0 9 o e e @ o o o o o e o o o o o o o o o o o o o o o o o o o o o o o o o Q O

short of expectation in almost all

Table 3: Importance of SACs in MAs providing (a) controi information
cases. From a control perspective, the
and (b) DIVI information
largest shortfalls were in relation to
the relevance, flexibility and
Provider of Control Provider of
reliability of information. From a DM Information DM Information
perspective managers were most Skills, Attributes
disappointed with the relevance, and Competencies
Mean Mean
scope and flexibility of information Importance Rank Importance Rank
('They tend to miss what I am getting
at sometimes. They are always trying Ethics 4.83 1 4.72 1
to get it back to the nearest numbers Honesty 4.44 2 4.44 3
... I won't be asked about numbers. Precision 4.33 3 4.33 5
I'll be asked about issues').
Sound Business Understanding 4.33 4 4.61 2
The ratings revealed that the MA was
perceived to be stronger at producing IT Skills 4.11 5 4.22 6
accurate, consistent, reliable and Financial Expertise 4.06 6 3.94 9
timely information. However,
Interpersonal & Comms. Skills 4.00 7 4.39 4
discussions with the managers
indicated that they were less satisfied Prob. Solving & Analytic Skills 3.83 8 4.00 8
with the MA's timeliness than the Team Skills 3.78 9 4.22 7
ratings suggest, and this was largely
attributed to the pressures of Impartiality 3.67 10 3.50 11
corporate reporting ('I am aware that Creativity 3.22 11 3.72 10
they are subject to heavy reporting
Conservativeness 2.33 12 2.06 12
requirements... and that is what I
think is one of the failings of the Single-Mindedness 1.94 13 2.00 13
MA, the information doesn't come
back to me on time, it's very rarely
real time. It's what stops us being "The key for me is getting the right balance. I want
proactive a lot of the time'). them to be conservative when they're generating my
monthly reports but I don't want them to be blind to new
ideas or improvement..."
What Skills, Attributes
and Competencies d
Managers ^vrant in context of DM than in the context of of a certain standpoint - I value
their MAs? control ('If the system is going to be impartiality in that sense').
useful in terms of making any
The managers were presented with a decisions, it's important that the Creativity was
list of specified skills, attributes and accountant's communications skills attribute that geraerated
competencies (SACs) and requested are strong in order to facilitate this'). the widest range of views
to indicate their rating of the Again, in the context of supplying among the managers.
importance of each in their MA. relevant DM information, some
Average ratings are reported in Table managers rated a sound business
3, showing values for the control role understanding as being even more As indicated in Table 3, managers
and DM role. important than honesty (They may generally considered creativity to be
get by without a huge business significantly more important in a
It was noticeable that managers DM scenario ('In a project sense
understanding for the day-to-day
valued ethics above all else in creativity goes up even further in
stuff, but for DM and projects, a
their MAs. Honesty was also rated as terms of coming up with new ideas
sound business understanding would
very important by almost all of of presenting data or new ways of
be critical').
the managers. analysing data for a project'). Some
Discussions with the managers managers did not attach much
An interesting feature is the extent to
revealed that they appreciated importance to creativity in the MA
which managers have different
impartiality in their MA, with ('Creativity is not at all important
expectations of their MA depending
half of those interviewed to me. There's no room nor
on whether they are engaged in
perceiving impartiality to be necessity for it'). Some wanted to
providing control or DM
very or extremely important. enjoy the best of both worlds ('The
information. Sound business
understanding, communication and Many managers value the unbiased key for me is getting the right
interpersonal skills, team-skills, and objective perspective offered by balance. I want them to be
problem solving and creativity were the MA (The financial numbers conservative when they're
considered more important in the cannot afford to be skewed in favour generating my monthly reports but

I18j Accountancy Ireland October 2007 Vol.39 No. 5

Managesment Jlccoimtiiig

guys can be geniuses with your spreadsheets but those perceived to be significantly
thene isn't that many of you that can sit down in a more important in providers of DM
meeting and share infonnation ..." information, namely, sound business
understanding, interpersonal and
communications skills and creativity.

Table 4: Rating by managers of actual SACs compared with desired SACs In contrast, MAs exceeded the
managers' expectations in relation to
Skills, impartiality, single-mindedness and
Attributes and Mean Mean Mean conservativeness. These SACs might
Competencies Actual Importance Difference* Importance Difference* be considered MA strengths by other
organisational stakeholders such as
Ethics 4.67 4.83 -0.16 4.71 -0.04 directors, shareholders, or the audit
Honesty committee, but discussions with the
4.56 4.44 0.12 4.44 +0.12
managers provided somewhat
IT SkiUs 4.33 4.11 0.22 4.22 +0.11 conflicting perspectives. Some
managers valued these particular
Precision 4.22 4.33 -0.11 4.33 -0.11
competencies ('I find them good at
Financial pushing back on me and my directs
4.17 4.06 0.11 3.94 +0.23 in terms of doing the right thing and
Expertise
stating everj^hing correctly'). Others
Impartiality 3.94 3.67 0.27 3.5 +0.44 identified them as factors that
inhibit the MA's performance of a
Prob. Solving & more involved role (T find them a bit
3.44 3.83 -0.39 4.00 -0.56
Analytic Skills too impartial. I wish they could be
Team Skills 3.11 on my side a bit more').
3.78 -0.67 4.22 -1.11

Single
Mindedness
3.11 1.94 1.17 2.00 +1.11 "Honesty is excellent but
they can be too Moody
Sound Business
honest. If only they could
Understanding
3.11 4.33 -1.22 4.61 -1.5 combine honesty with a
bit of cop on ..."
Conservativeness 2.78 2.33 0.45 2.06 +0.72

Interpersonal & The discussions revealed a similar

2.72 4.00
Comm. Skills
Creativity 2.44 3.22
* +/- = MAs' actual rating exceeds/falls below managers' expectation
I don't want them to be blind to
new ideas or improvement').
What Skills,
Attributes,
Gompeteneies
t skills ('You guys can be geniuses with
exhibited by MXs?
The managers were requested to rate
their MAs based on the specified SACs
and average ratings are shown in the
second column of Table 4. The third
column shows managers' perceptions
of the mean importance of each SAC in
a control context as reported in Table 3
and the fourth column shows the
difference between actual and
importance ratings. The final two
columns show the same details for DM.
-1.28 4.39 -1.67
-0.78 3.72 -1.28
Table 4 demonstrates the extent to
which MAs' performance does not
match managers' expectations. The
MAs' actual ratings fell below
managers' expectations most
significantly in relation to
interpersonal and communications
your spreadsheets but there isn't that
many of you that can sit down in a
meeting and share information'),
sound business understanding (T
sometimes feel that they are managed
by spreadsheets and if the spreadsheets
say we shouldn't do it, then we
shouldn't do it. There is, at times, an
absence of any judgement that is non-
financially driven') and creativity (T'd
like them to show more initiative,
kick-start more ideas, find more
solutions'). These SACs were among
range of views in relation to honesty.
Some managers appreciated the MA's
inherently honest approach, while
others felt that they could be 'too
honest' and that this was detrimental
to their proposed 'business partner'
role ('Honesty is excellent but they
can be too bloody honest. If only
they could combine honesty with a
bit of cop on' and 'Yeah I appreciate
their honesty and openness but
sometimes they just lack that bit of
commercial sawyness that is
required to get the job done').
Changes in external operating
environments and internal workings
of organisations have combined to
underline the importance of high
quality accounting information. High
profile corporate scandals such as
Enron and Worldcom have led to
increased government and public
scrutiny of accounting practices and

201 Accountancy Ireland October 2007 Vol.39 No. 5


procedures. This has resulted in a
growing emphasis on compliance and
transparency which places increased
pressures on the organisation's
control function. At the same time,
technological developments have
contrihuted to a shortening of
product life cycles, and a wider range
of products and services. Innovations
in production and delivery methods
and the opening up of new markets
have led to rapid globalisation and
increased competition. This has had a
knock-on effect on the way in which
many organisations operate with the
result that the decisions faced by
today's managers are varied in nature,
usually require prompt response, are
often ill-structured and tend to be
dominated by issues related to
customers, competitors and the
external environment.
With these developments in mind,
the question of the suitability of the
Managers want Management Accounitants to
demonstrate greater levels of business understanding,
communications skills and creativity, making them
more commercially aware and externally focused.
MA as a simultaneous 'controller' and
'business partner' is more important
then ever. The study was limited in
that it focused exclusively on the
perceptions of managers and there
are of course other organisational
stakeholders such as directors and
shareholders who may hold very
different opinions regarding the MA's
role. Although rarely reported, the
views of managers who are charged
with the running of key areas of the
business are particularly important,
and the findings therefore provide
some key insights into the challenges
facing MAs if they are to contribute
effectively to control and DM in
the future.
MAs can fulfil the role of 'honest
bean counter' and 'savvy business
advisor', but in doing so they must
overcome considerable challenges
and address the growing
complexities presented hy such a
role. The study provided consistent
evidence that managers have
different expectations of their MAs
depending on whether they are
engaged in providing information
primarily for use in control or DM.
Contemporary MAs are expected to
approach these two aspects of their
role in different ways. In doing this
they must exercise initiative and
adaptability in tailoring information
for particular circumstances without
frequent input from the manager. In
essence, they are expected to be able
to put themselves in the position of
the decision maker.
The study revealed that MAs
demonstrate high degrees of ethical
hehaviour, conservativeness and
impartiality, important traits in any
scorekeeper that provide reassurance
for shareholders. Managers, however,
want MAs to demonstrate greater
levels of business understanding,
communications skills and creativity,
making them more commercially
aware and externally focused. MAs
must develop their skills and abilities
beyond the purely technical if they
are to strengthen their role as a
simultaneous controller and business
partner. Educators and professional
bodies need to continually review
their education, training and
continued professional development
programmes to ensure that they are
providing the necessary support and
opportunities for continued updates
and personal development. Finally,
managers can huild better
relationships with MAs hy
communicating with them more
frequently, by engaging them in the
DM process at an earlier stage and hy
recognising their value adding
potential as members of the
management team.
Notes
1. Burns, J. and H. Yazdifar, 2001. 'Tricks or
Treats'. Financial Management, March,
pp. 33-35.
2. Pierce, B. and T. O'Dea, 2003. 'Management
accounting information and the needs of
managers: Perceptions of managers and
accountants compared'. British Accounting
Review, Voi. 35, No. 3, pp.257-290.
3. Granlund, M. and K. Lukka, 1998. 'Towards
increasing business orientation: Finnish MAs
in a changing cuiturai context'. Management
Accounting Researcti, No. 9.
Oria Feeney is a PhD Researcher
at DCU Business Schooi.
Bernard Pierce is Professor of
Accounting at DCU Business School.
E-mail: bernard.pierce@dcu.ie
Accountancy Ireland October 2007 Vol.39 No. 5
The IASB Proposes Additional
Guidance on Hedge Accounting
The International Accounting
Standards Board (IASB) has
published an exposure draft (ED) of
proposed amendments to IAS 39
Financial Instruments: Recognition and
Measurement. The amendments are
intended to clarify what can be
designated as a hedged item in a
hedge accounting relationship.
The ED specifies the risks that
qualify for designation as hedged
risks when an entity hedges its
exposure to a financial instrument.
In addition it clarifies when an
entity may designate a portion of
the cash flows of a financial
instrument as a hedged item.
The proposals respond to requests
for additional guidance on what IAS
39 permits to be designated as a
hedged item. Although the IASB is
undertaking research that will
ultimately lead to the replacement
of IAS 39, that work is at an early
stage. The IASB therefore decided to
propose the amendments contained
in the exposure draft.
The exposure draft is open for
comment until 11 January 2008.
IASB Issues Revised Standard on the
Presentation of Financial Statements
The International Accounting
Standards Board (IASB) has issued a
revised version of IAS 1 Presentation
of Financial Statements. The revision
is aimed at improving users' ability
to analyse and compare the
information given in financial
statements.
The changes made are to require
information in financial statements
to be aggregated on the basis of
shared characteristics and to
introduce a statement of
comprehensive income.
The revised standard will come into
effect for the annual periods
beginning on or after 1 January
2009, but early adoption is
permitted.
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