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Introduction
The primary role of management accountants in manufacturingorganizations is to provide a financial analysis of management decisionsand activities. As such, the reports generated by the managementaccounting system are to be used by organizations internally. Inessence, management accountants prepare the report card by whichoperations managers are evaluated[1 ]. Onerecent criticism of many management accounting systems is that they aretoo closely connected to the financial accounting system[2 ]. Financial accounting collects, classifies,and reports financially based transactions subject to numerousdisclosure requirements. The reports provided by the financialaccounting system are to be used by sources external to the organizationsuch as shareholders, investors, creditors, financial analysts, the IRS,etc. Linking the management accounting system to the financialaccounting system strongly encourages operations managers to emphasizeplant financial performance rather than other, perhaps more meaningful,performance criteria. And since the primary financial accounting report,the income statement, is normally generated, monthly operations managersare encouraged to focus on short-term financial performance rather thanon a longer time period. Indeed, in a recent study by the IndustrialResearch Institute[3 ], operations managersidentified the two major threats to US competitiveness as externalfinancial pressures and short-term management focus.
Compared to financial accounting, management accounting is fairly newhaving evolved from simple cost accounting systems. Two primary purposesof the cost accounting system were to value inventory and to determinecost of goods sold (CGS) for the plant income statement, each of whichis a requirement of the financial accounting system[4 ,5 ]. The use of cost accounting data fordecision making and performance evaluation has recently gainedimportance. Given that managerial accounting evolved from simple costaccounting where the primary function is to supply information requiredby financial accounting, it is easy to understand why managementaccounting systems have been criticized for being too strongly linked tofinancial accounting.
In addition to the fact that management accounting reports are thescore-card of an operation manager's performance, another reason for thesometime overemphasis by these managers on financial accounting reportsis the short-term nature of US capital markets. Wall Street investorsare required by numerous regulatory bodies to keep a"hands-off" relationship with the companies they own.Further, institutional investors such as pension funds, mutual funds,etc., are required by law to seek a maximum rate of return on theirinvestment. Since a majority of stock ownership in US companies is heldby these institutional investors, stocks are often traded likecommodities...