The International Management Accounting (IMAS) Project

Since 01 January 2005 the International Financial Reporting Standards (IFRS) are “live”. There is no doubt that the IFRS represent a big step forward in creating more transparency and comparability between companies from an investor perspective. But what has been overlooked so far is that tight links between traditional, local financial accounting standards or GAAP and the (still mainly locally shaped) management accounting practice existed. These linkages reflect practices that have been developed over decades in companies and in the management accounting/controller communities in the different countries. They ensure that companies not only dispose of the analytical data to support management in decision making and performance management (based on a performance-concept that is reflected in the financial accounts based on local GAAP), but that serve also as the foundation to value certain financial statement items. With IFRS, these linkages have now broken down - leaving management accounting and controlling behind.

However, the development of a new proven ‘best practice’ in creating controlling, management accounting and analytical data to support managerial decision making based on an IFRS- performance concept is at best still in its early stage. What we completely lack so far are analytical / management accounting concepts based on the IFRS-performance- philosophy that support management in detailed day-to-day decision making.

There are three aspects that are important in this context:

One aspect is, that businesses span today – also at midsized companies – across many countries and are increasingly international. Therefore companies need controlling and management accounting concepts standardized across their local operations in order to create a common internal global ‘language’ in decision making and performance management. As a consequence, the development of new management accounting best practices and concepts has to move to an international level. Therefore, the time has come for International Management Accounting Standards.

The second aspect is that traditional management accounting concepts are falling short to support today’s managerial decisions and to support the valuation of many of today’s corporate assets. The main reason for this is that the foundation of these management accounting concepts and instruments (focusing mainly on cost accounting) have been created 80 – 100 years ago in an era, were the main value creation process of most companies was mass-manufacturing. For the value creation activities of today – in R&D, marketing, strategy management etc., we still lack concepts and instruments in management accounting and decision support that apply the same rigor and strength like the traditional product costing and margin accounting concepts that supported well for decades the mass-manufacturing model. We have to move to the next level in management accounting and controlling. Therefore, the time has come for International Management Accounting Standards.