THE FFSC Management

Accounting Project

A Discussion of Framework,
Background, and Objectives

Steven L. Hofing
Chair, FFSC Technical Committee
Partner, Ag Education & Consulting
slh@centrec.com
Overview of Management Accounting Project
2000 Technical Symposium August 12, 2000 Slide 1
 Topics of Discussion

 Terminology confusion and the importance of a

sound conceptual framework
 Issues and challenges around each of the three
project components
 Conceptual Framework
 Chart of Accounts
 Standard Integrated Financial and Production Measures
 Our process for execution of the project

Overview of Management Accounting Project

2000 Technical Symposium August 12, 2000 Slide 2
 Choose Your Weapons!

Overview of Management Accounting Project

2000 Technical Symposium August 12, 2000 Slide 3
 Financial Accounting
(Reporting)
 Focused on needs of external users who lack the
authority to prescribe the information they want and
must rely on information management
communicates to them
 Common interests of many users focus on the
ability of an enterprise to generate favorable cash
flows, but objectives are often phrased using
investment and credit decisions to give them a
focus

Overview of Management Accounting Project

2000 Technical Symposium August 12, 2000 Slide 4
 Financial Accounting
(Reporting)
 Primary focus is on earnings and its
components
 Provides information about an enterprise’s
financial performance during a period and
about how management has discharged it’s
stewardship responsibility to owners

Overview of Management Accounting Project

2000 Technical Symposium August 12, 2000 Slide 5
 The Conceptual Framework for
Financial Reporting
 Objectives – useful to investors and creditors
 Qualities – relevance, reliability, comparability, and
consistency
 Assumptions – economic entity, going concern,
monetary unit, and periodicity
 Principles – historical cost, revenue recognition,
matching, full disclosure,
 Constraints – cost-benefit, materiality, industry
practice, conservatism
Overview of Management Accounting Project
2000 Technical Symposium August 12, 2000 Slide 6
 The Manager’s Need for
Information
 Plan effectively
 Direct operations
 Solve problems

Overview of Management Accounting Project

2000 Technical Symposium August 12, 2000 Slide 7
 Managerial Accounting

 Focuses on providing data for internal uses

 Places much more emphasis on the future
 Is not governed by GAAP
 Emphasizes relevance and flexibility
 Places less emphasis on precision and more
emphasis on nonmonetary data
 Emphasizes segments rather than the entity
 Draws heavily on other disciplines
 Is not mandatory
Overview of Management Accounting Project
2000 Technical Symposium August 12, 2000 Slide 8
 Similarities among Managerial
and Financial Reporting
 Both rely on the accounting information
system
 Both are concerned with stewardship, with
financial accounting concerned with
stewardship over the company as a whole,
managerial accounting concerned with
stewardship over its parts

Overview of Management Accounting Project

2000 Technical Symposium August 12, 2000 Slide 9
 Managerial Accounting and the
NPPC Standards

 Financial Accounting  Managerial Accounting

 External Focus  Internal focus
 Compliance activities  Decision support activities

 Investor Reporting  Management reporting

 Outside constituency  Internal constituency

 Whole entity oriented  Segment focused /

databases specialized databases

Overview of Management Accounting Project

2000 Technical Symposium August 12, 2000 Slide 10
 Cost Accounting?
Compliance

Financial

Investor
Reporting

Whole Entity Databases

Overview of Management Accounting Project

2000 Technical Symposium August 12, 2000 Slide 11
 Cost Accounting?
Compliance

Decision Support

Managerial
Financial
Segment/Specialized
Investor Databases
Reporting Management Reporting

Whole Entity Databases

Overview of Management Accounting Project

2000 Technical Symposium August 12, 2000 Slide 12
 Cost Accounting?
Compliance

Decision Support

Managerial
Financial
Segment/Specialized
Investor Databases
Reporting Management Reporting

Whole Entity Databases

Overview of Management Accounting Project

2000 Technical Symposium August 12, 2000 Slide 13
 The integration of systems,
managerial, and financial reporting

Managerial
Reporting/Analysis
Adjustments/
Internal books Reformatting
and records

Adjustments/Reformatting/
Additional disclosure

External Whole entity

Reporting reporting

Overview of Management Accounting Project

2000 Technical Symposium August 12, 2000 Slide 14
 The Challenge of our MA Project

 Build a foundation of concepts (when some groups have

already got the house pretty well complete)
 Balance usefulness and cost (and vagueness and specificity)
 Create a forum for acknowledging commonality of purpose
while allowing industry specific requirements
 Involve all key users with interest and background in
management information systems for agricultural producers
 Integrate systems guidance, benchmarking requirements,
and managerial flexibility

Overview of Management Accounting Project

2000 Technical Symposium August 12, 2000 Slide 15
 Project Components

 Conceptual Framework
 Zero Level Chart of Accounts
 Enterprise Level Production and Financial Measures

Overview of Management Accounting Project

2000 Technical Symposium August 12, 2000 Slide 16
 The Conceptual Framework

 Identification of the components of useful

information
 General elements of reports and measures
 Cost, production, and profit center definition
 Integration of economic, financial, and managerial
analysis
 Identification of impact and implications of
selecting non-complying approaches for managerial
information
Overview of Management Accounting Project
2000 Technical Symposium August 12, 2000 Slide 17
 The Zero Level Chart of
Accounts
 Recommendations for accounting systems
 Discussion of numerical and hierarchical
designs
 General guidance (versus specification) for
commodity group application

Overview of Management Accounting Project

2000 Technical Symposium August 12, 2000 Slide 18
 Integrated Production and
Financial Measures
 Specification of summary level measures at
the entity level
 Guidelines for overall grouping and
identification of segment level integrated
measures

Overview of Management Accounting Project

2000 Technical Symposium August 12, 2000 Slide 19
 Project Approach

 Workplan and Schedule

 Organizational Hierarchy

Overview of Management Accounting Project

2000 Technical Symposium August 12, 2000 Slide 20
 The Workplan and Schedule

Sep-00 Oct-00 Nov-00 Dec-00 Jan-01 Feb-01 Mar-01 Apr-01 May-01 Jun-01 Oct-01
1. Concepts White Paper
2. Chart White Paper
3. Tech Comm Working Session 1
4. Multi Commodity Meeting
FFSC Annual Meeting
5. Measures White Paper
6. Tech Comm Working Session 2
7. Multi Commodity Meeting (optional)
8. Measures Exposure Draft
9. Final Approval

Overview of Management Accounting Project

2000 Technical Symposium August 12, 2000 Slide 21
 The Organizational Hierarchy

E x e c u t iv e C o m m it t e e

A d v is o r y C o u n c il

T e c h n ic a l C o m m it t e e

S u b c o m m it t e e s D e v e lo p e r s

Overview of Management Accounting Project

2000 Technical Symposium August 12, 2000 Slide 22
 We Need Your Help!!

Overview of Management Accounting Project

2000 Technical Symposium August 12, 2000 Slide 23