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Fábio Frezatti University of São Paulo, Brazil

Differences between Financial Accounting and Management Accounting: An Empirical Study among Researchers in Various Countries. Fábio Frezatti University of São Paulo, Brazil. Presentation structure. Motivation & Limitations Research question Research structure F & M Accountings differences

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Fábio Frezatti University of São Paulo, Brazil

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  1. Differences between Financial Accounting and Management Accounting: An Empirical Study among Researchers in Various Countries Fábio Frezatti University of São Paulo, Brazil

  2. Presentation structure • Motivation & Limitations • Research question • Research structure • F & M Accountings differences • Findings • Final comments

  3. Motivation • Management accounting needs a clear identity • Management accounting personality requires to be distinguish from financial accounting • Few researches in international management accounting • Co-authors: Reinaldo Guerreiro and Andson B.Aguiar

  4. Limitations to the research Difficulties to: • identify the proper answers; • have the questionnaire filled; • receive back the questionnaires.

  5. Research question • What are the elements that differentiate financial accounting from management accounting in different countries?

  6. Research structure Conceptual definitions of MA and FA Conceptual differences between MA and FA Questions structure Field research Paper development Answers identification Analysis Time line: 2004-2006

  7. Answers

  8. Main differences between Financial and Management accounting Main Differences References Anderson, Needles and Cadwell (1989) Louderback et al. (2000) Anthony and Welsch (1981) Hansen and Mowen (1997) Horngren, Foster and Datar (2000) Horngren, Sundem and Stratton (2004) 1.Primary information users 2.Accounting system types 3.Freedom to choose 4.Measuring units 5.Analytic focus 6.Time horizon and report frequency 7.Reliability level 8.Regulatory or influential bodies 9.Technical responsibility for elaboration

  9. Main differences between Financial and Management accounting • 1.Primary information users: • Internal x external to the organization • 67% consider that two branches are needed. Reasons for two accountings are: • Significant number differences • Cost/benefit favourable • Significant qualitative differences

  10. Main differences between Financial and Management accounting • 2.Accounting system types: not only monetary, not only accounting • Exclusively uses data base originated by financial accounting: 33% • Additionally uses other monetary databases that are not necessarily consistent with financial accounting: 71% • Uses non monetary database: 50%

  11. Main differences between Financial and Management accounting • 3.Freedom to choose: different approaches of principles may be required • Must they be the same? Said yes/no: • Entity: 50% / 33% • Going concern: 67% / 25% • Historical cost as a value base: 25% / 58% • Match: 29% / 54% • Prudence: 29% / 54%

  12. Main differences between Financial and Management accounting • 4.Measuring units: different measures • 75% mentioned just local currency • Multinational company • What do they think about this?

  13. Main differences between Financial and Management accounting • 5.Analytic focus: detailed information v summarized ones • The “whole picture” is important for both; • Analitic focus is critical for Management accounting: • Business units (25% for FA and 83% for MA) • Cost centers (4% for FA and 92% for MA) • Product groups (4% for FA and 88% for MA) • Projects analysis (13% for FA and 71% for MA)

  14. Main differences between Financial and Management accounting • 6.Time horizon and report frequency: different demands • Financial accounting: year (46%) • Management accounting: month (67%) • Obs.: more than one answer was accepted.

  15. Main differences between Financial and Management accounting • 7.Reliability level: no audit is required in management accounting. • External audit is required for Financial accounting (92%) but not for Management accounting (4%) • Internal audit is required for Financial accounting (29%) amd Management accounting (21%).

  16. Main differences between Financial and Management accounting • 8.Regulatory or influential bodies: • Other companies: 17% for Financial accounting and 50% for Management accounting. • Local FASB: 79% for Financial accounting and 17% for Management accounting • Public bodies: 83% for Financial accounting and 17% for Management accounting. • Financial legislation: 79% for Financial accounting and 17% Management accounting • Managers: 33% for Financial accounting and 79% for Management accounting

  17. Main differences between Financial and Management accounting • 9. Technical responsibility for elaboration: not required • Technical responsibility for reports requires any credentials: • Yes: 58% for Financial accounting and 8% for Management accounting. • No credentials for both: 34% • Accounting degree for technical responsibility: • Yes: 50% for Financial accounting and 8% for Management accounting. • Not required accounting degree for both: 29%

  18. Final comments • Exploratory research from experts perception; • What is obvious must be verified; • There is diferentiation between the two accountings (levels). • Additional research is needed to customise the specific issues of management accounting; • More comprehensive approach and deeper analysis

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