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A plan for better business

Andrew Harding, managing director, CIMA

Guest post by Andrew Harding*

It was encouraging to see BDO's survey proclaiming that business optimism in the UK is at its highest peak for 22 years. But we cannot afford to become complacent. That is why we at the Chartered Institute of Management Accountants (CIMA) have launched a consultation on a set of globally-applicable management accounting principles.

Over the last few years, we have seen globalisation and the relentless pace of technological progress make change much harder to manage. Businesses have become more vulnerable.

Good financial reporting, on its own, is not enough. Management accounting must be at the heart of any organisation, regardless of size or sector. Business leaders need senior finance professionals who can act as the trusted guide, and conscience, of the organisation. This in turn will provide investors, customers, suppliers, employees and the general public with a greater confidence; a greater trust.

Management accountants have the ability and judgement to make objective, ethical decisions that consider the public interest. But the quality of management accounting remains varied. You only have to look at the last government spending review in the UK as an example. It highlighted nearly £700bn in costs, but there was nothing reported about outcomes of the activity which was funded. Thinking globally, there are Spanish airports that have been built but never used, and ghost towns in China that lie empty. In the private sector, there is a long list of high-profile corporate failures where organisations have not accounted for what the future may hold.

We believe that our new Global Management Accounting Principles will change this. We have outlined the values and qualities that represent best practice management accounting in our draft set of principles. They include guidance on preparing relevant information, both financial and - importantly - non-financial, and modelling value creation. The aim is to provide the knowledge necessary for businesses to benchmark their management accounting function to ensure it is the best it can be.

But we need businesses and other relevant organisations across the globe to tell us how we can meet their fast-changing needs. By working together, we can contribute to a comprehensive system that will, put simply, make business better.

So in partnership with the American Institute of CPAs (AICPA), we are consulting on our draft principles across 177 countries. We will engage with public and private organisations, large and small, on a truly global level.

And I am pleased to say that the project has already attracted considerable support from within the business community.

HSBC Group chairman Douglas Flint said that "management accounting is a critical aspect of the finance function because it informs the board, investors and management why the numbers are what they are, not just what the numbers are." He believes that "the introduction of a set of global management accounting principles will be very welcome to businesses around the world" and urges businesses to "input into this important consultation".

The International Integrated Reporting Council chief executive Paul Druckman believes that "with a focus on value creation and relevance of information, there is synergy between the Global Management Accounting Principles and Integrated Reporting. We should all support this plan to put in place a consistent global management accounting framework, which will help more and more organisations deliver value over the long-term."

This is about making all organisations stronger. Everyone wants to be here for the long-term. But they need the right information to take the right decisions and move forward.

Our consultation will close on 10 May 2014. To learn more and respond to the consultation, I would urge business people from all sectors, and all geographies, to please visit our website here.

*Andrew Harding is managing director at CIMA

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