by Statements on Management Accounting (SMAs) are produced, issued, and implemented to reflect official positions of the Institute of Management Accountants (IMA), the largest and most prominent management accounting organization in the world. The IMA is an organization of accounting professionals that had a membership of approximately 70,000 members in 2005.
Management accountants are vital to the financial health of organizations. They make critical decisions, safeguard a company’s integrity, and plan for business sustainability. They might be CFOs and controllers, budget analysts and treasurers, or one of many other game changers on internal teams. Most of all, as the majority of the accounting and financial workforce, they help drive an organization’s strategy and value amid an unpredictable market.
Purpose
The purpose of the MAC/FAR Committee in issuing SMAs is generally twofold:
(1) To express the official position of the IMA on accounting and business reporting issues raised by other standard-setting groups
(2) To provide broad guidance to IMA members and to the wider business community on management accounting concepts, policies, and practices. Regarding the first stated purpose, other standard-setting groups include those such as the FASB, the Governmental Accounting Standards Board, the International Accounting Standards Committee, and government agencies such as the Securities and Exchange Commission. Regarding the second purpose, the work of the MAC/FAR trustees is seen as an effective method of summarizing the wide range of activities that define management accounting.
Some accountants believe that SMAs should be accorded the same considerable authority as generally accepted accounting principles. As of 2005, such authority had not been granted. There is some support for this position. The Auditing Standards Board of the American Institute of Certified Public Accountants (AICPA) in the Statement of Accounting Standards (SAS) No. 5 (later revised as SAS No. 69 in 2005, with amendments in SAS No. 93) stated that principles that are “pronouncements of bodies composed of expert accountants,” and are issued only after “a due process procedure, including broad distribution,” are authoritative and are to be applied where relevant.
Individuals who work throughout the accounting profession have a significant responsibility to the general public. Financial accountants deliver information about companies that the public uses to make major financial decisions. There must be a level of trust and confidence in the ethical behavior of these accountants. Just like others in the business world, accountants are confronted endlessly with ethical dilemmas. A high standard of ethical behavior is expected of those employed in a profession. While ethical codes are helpful guidelines, the rationale to act ethically must originate from within oneself, from personal morals and values. There are steps that can provide an outline for examining ethical issues:
- Recognize the ethical issue at hand and those involved (employees, creditors, vendors, and community).
- Establish the facts of the situation (who, what, where, when, and how).
- Recognize the competing values related to the issue (confidentiality and conflict of interest).
- Determine alternative courses of action.
- Evaluate each course of action and how each relates to the values in step 3.
- Recognize the possible consequences of each course of action and how each affects those involved in step 1.
- Make a decision, and take a course of action.
- Evaluate the decision.
