Management Accounting in Transitional Economies

1. Management Accounting in Transitional Economies By: Olga Girinova Olga Kuznecova Oleg Leonov Elena Safonova 2007

2. Main factors of transitional economies • Growth of privatization • Deregulation of economy • International business impact • Global competition • New information and production technology

3. Impacts on management accounting development • Changes in the business environment • Competition • Changes in the form of business ownership • Foreign Direct Investment flow • Financial market development • Globalization

4. Impacts on management accounting development 2. Changes of internal business changes: • managerial practices • production structure • organizational structure • demand for more detailed divisional information • development and implementation of new information processing and transmission technologies • benchmarking in the cost and management accounting

5. Impacts on management accounting development 3. Accounting environment • Changing in the accounting legislation and new laws introduction • Harmonization process • Management accounting knowledge transfer

6. Impacts on management accounting development 4. Culture

7. Central & Eastern Europe Economic situation influencing management accounting development: • centrally-planned market background; • loss of some market (particularly in former Soviet Union); • a sharp rise in the interest rates; • multiple increase in prices for energy;

8. Central & Eastern Europe Previous system “legacy” for management accounting: • Full costing techniques; • long-term planning; • operational management accounting; • Need for IT support;

9. Central & Eastern Europe Negative aspects: • Using financial accounting for decision making • Lack of possibility to use the information from budgets • performance measurement based on the products and function is not efficient • absence of special management accounting branch

10. Central & Eastern Europe Needs for improvement the countries faced: • management accounting department; • new techniques implementation; • relevant IT support; • experience in new condition;

11. Management Accounting in Russia • Still remains to be cost accounting rather than management • Strong dominance of tax accounting • Cost leadership • Lack of professional training and knowledge • Inadequacy of the Financial Accounting standards impedes management accounting development

12. Management Accounting in Russia • Difficult to search for management accountants within organizational structure • Gap in coordination within an organization • MAS are mostly seen as cost accounting systems

13. Management Accounting practices in China • Socialistic period - the government controlled prices and investment decisions • Relatively limited use of budgets • Standard costing techniques appreciation • Cost Volume Profit analysis (CVP) link target profit with operational planning • Increase in scope of application of responsibility accounting • Low level of application of strategic management techniques - ABC, BSC etc. • Inability of a system based on production to adapt to one based on price

14. Difficulties for Management Accounting in the emerging countries: • Market economy transition problems • Developing economy – lack of investment into the information technology • Lack of knowledge • importing western theory with low adjustment to the local conditions

15. Thank you for your attention!