Strategic Management Accounting

This segment examines the strategic management accountant's (SMA) role in dynamic organisations operating in the global business environment. In this role, the professional accountant engages with the organisation's top management team and contributes to strategy development and implementation with the aim of creating customer value and a strong competitive position for the organisation. The segment highlights techniques of value chain analysis and project management which have become increasingly important in contemporary operational environments.

In the segment there are references to the SMA’s role in the context of the professional accountant's ethical responsibilities and judgment as introduced in the Ethics and Governance segment. Also discussed are investment evaluation and strategic business analysis in the context of assessing and responding to risk, as covered in the Financial Risk Management and Advanced Audit and Assurance segments. Candidates are introduced to strategic management concepts which are expanded on in the Global Strategy and Leadership segment.

Strategic Management Accounting is an elective segment in the CPA Program professional level for candidates who commenced prior to semester 2, 2009. It is a compulsory segment for candidates commencing the CPA Program professional level from semester 2 2009.

Segment aims

The aims of the segment are:

• to develop the skills of the professional accountant in creating, managing and enhancing value to the organisation through the use of various strategic management tools and techniques
• to discuss techniques for developing, implementing and monitoring strategies.

Segment objectives

On completion of this segment, candidates should be able to:

• describe the role of Strategic Management Accounting in the design, control and development of socially responsible and sustainable businesses
• explain the strategic management cycle and the leadership role of the professional accountant in strategic management
• explain the role of organisation and industry value chain analysis
• apply organisation and industry value analysis to reconfiguring value adding activities, value drivers and value chains
• analyse the characteristics of effective strategic performance measurement and control systems
• describe and apply strategic management accounting techniques to the selection, planning, implementation and control of projects

Segment content

Module 1: Strategic Management Accounting: Supporting the value creation process

This module sets the framework for strategic management accounting. It discusses traditional management accounting and the key changes leading to the development of strategic management accounting. The module considers how the professional accountant and strategic management accounting systems play a critical role in business. This module also introduces the key contemporary skills that will be expanded on in subsequent modules.

Contents:

• Part A: The role of strategic management accounting
• Part B: Understanding and supporting management
• Part C: Management Accounting Systems (MAS)
• Part D: The emerging role of the management accountant

Module 2: Creating organisational value

The ability of an organisation to deliver value and secure a competitive position depends on how well it develops and executes its strategy. This module provides an overview of strategic management in the context of the organisation’s value chain. The module examines the concept of the value chain and the role of a strategic management accountant in generating information about value chain performance.

Contents:

• Part A: Value creation
• Part B: Strategic management

Module 3: Performance measurement

Sound design and an understanding of the use and implications of strategic performance measurement and control systems are gaining increasing importance in all organisations. This module focuses on understanding the key role that performance measurement plays in strategy and value creation. It discusses the characteristics of effective performance measures and control systems, the use of performance measures, and the application of performance measurement to motivate and reward employees. The key themes are the importance of performance being socially responsible and sustainable; the leadership role of the professional accountant in performance measurement; and the importance of value adding activities.

Contents:

• Part A: What do we mean by performance measurement?
• Part B: The multiple roles of performance measurement
• Part C: Strategy, management control, and performance measurement
• Part D: The role of performance measurement and its implications for accountants
• Part E: Models of performance measurement
• Part F: Determining performance measures and setting performance targets
• Part G: Improving performance
• Part H: Behavioural consequences of performance measurement

Module 4: Techniques for creating and managing value

This module shows how, through the use of a variety of strategic management accounting concepts and tools, the professional accountant is able to assist with the growth of organisational value. The module uses a case study to illustrate how specific strategic management accounting concepts and tools can be applied to the value chain.

Contents:

• Activity-based costing
• Time-driven activity-based costing
• Levers for managing value creating activities
• Target costing
• Strategic cost management
• Strategic profit management

Module 5: Project management 

Project management is an integral aspect of management strategy. This module explores the roles in project management, including project leadership and the professional accountant. It examines the strategic management accountant’s role in project selection, planning, implementation, control and monitoring and project completion and review.

Contents:

• Part A: Project management defined
• Part B: Roles in project management
• Part C: The strategic management accountant’s role in project selection
• Part D: The strategic management accountant's role in project planning
• Part E: The strategic management accountant’s role in project implementation, control and monitoring
• Part F: The strategic management accountant’s role in project completion and review

Case study

The case study module consolidates the understanding of the strategic management accounting concepts, tools and techniques covered in Modules 1 to 5 through application to a hypothetical case study. The case study focuses on a traditional manufacturing environment. ‘Terracotta Ltd’ produces and supplies a variety of clay products to the building industry, including bricks, pavers and tiles. The case explores:

• The influence of global factors on the company;
• The requirement for long-term strategic analysis;
• The employees within the company and its leadership;
• Environmental and social impacts and the requirement for environmental reporting;
• Risk and internal control analysis; and
• Project management requirements.

At the end of the case study, there is a series of tasks (and suggested answers) which candidates are required to complete.