Conceptual framework

What is a financial accounting system?

Financial accounting is the field of accounting concerned with the summary, analysis and reporting of financial transactions. An ideal accounting system should be based on a conceptual framework.

Explain the traditional management control "hierarchy"?

It's formed as a pyramid with three parts: 1. Strategy formulation (Strategic level) - Goals and strategies 2. Management control (Tactical level) - Strategy implementation 3. Task control (Operational level) - Efficient and effective performance

Why is a conceptual framework used?

It's used for practical reasoning, the reasoning starts with statements that express what we want to achieve by making decisions about setting rules for practices.

Illustrate the connection between a financial accounting system and a conceptual framework?

See practice-paper.

What is a strategic management control system (SMA)?

Strategic management control systems differs from traditional management control systems in 4 ways: 1. SMA supports both strategy formulation and strategy implementation. 2. Strategic management control is to a large extent based on non-financial information. 3. Strategic management control supports not only tactical decision-making but also strategic and operational decision-making. 4. Strategic management control is designed for, and adapted to, the organisation's unique strategies.

Which measures was used in management control systems?

The performance measures was: 1. JIT (Just-in-time) 2. TQM (total quality management) 3. FMS (Flexible manufacturing systems)

What is the purpose of the management control system?

The systems are tools for managers to steer the company towards its goals and make decisions. The focus is therefore to set and achieve goals rather than financial metrics.

Which measures is used in SMA?

We often use the balance scorecard. We can also link the balanced scorecard to a strategy map.

Which are the four perspectives in the balance scorecard?

1. Financial perspectives: - How do we look to shareholders 2. Internal business perspectives: - What do we have to excel at? 3. Innovation and learning perspectives: - Can we continue to improve and create value? 4. Customer perspective: - How do customers see us?

Explain the different parts of the hierarchy and how the relate to eachother?

1. Objectives: - States the goals and purpose with the FS. - Similarities with the IASB, since the standards clearly state its objectives. 2. Fundamental parts: - Accounting Postulates and theoretical objectives. - General accepted axioms for their clear connection to the objectives. - These to combined later on govern for the accounting principles. 3. Operational: - Accounting principles, e.g Revenue, matching, cost and realization. - Can be seen as decision rules. - Easy to draw a connection to both IASB & IFRS because both are principle based. 4. Display: - Contains of the accounting techniques and the specific rules. - IFRS can be connected, e.g telling us how we can value inventory (FIFO or LIFO)

Name some differences between strategic and traditional management control systems?

1. SMC become influential because it "solved" the inefficiency in the traditional management control. 2. Instead of seeing the three units/levels (strategic, tactical and operational) as independent units, the SMC allows all units to interact/create synergies. 3. SMC using the interactive approach more (bottom-to-top) and TMC using the diagnostic approach (top-to-bottom).

What is a conceptual framework?

A conceptual framework can be defined as a system of ideas and objectives that lead to the creation of a consistent set of rules and standards. Specially in accounting, the rules and standards set the nature, functions and limits of the financial statements and financial accounting.

Explain the management control system?

A management control system is a system that gathers and uses information to evaluate performance of different organizational resources, both financial and non-financial.

What is a strategy map?

A strategy map is a visual represenation of a companies objectives and how they relate to eachother. A typical strategy map is organized from the four perspectives in the balance scorecard.

Why did the management control system arose?

It arose because financial accounting systems where backward looking. By right systems and tools we can instead create information on the current situation of the company and its future.

Mention some challenges for IFRS?

Pros: - Comparability & transparency between countries. Challenges: 1. Different laws and rules makes it hard to implement IFRS identically. 2. For example, taxastion, laws or monitoring systems concerning about accounting. 3. Affected by accounting standards differently. 4. Political pressure 5. All of this can also make the interpretation of IFRS different between countries.