Management accounting gaining importance in the era of globalisation
April, 21st 2012
Fazlur Rehman Khan, Dhaka-born, Chicago-bred structural engineering wiz, is the exception that proves the rule when it comes to buildings: the rule is, the world knows the architect behind the imposing design and dazzling facade of famous buildings while the structural engineer who makes the design a viable reality remains anonymous.
Cost and management accountants are to businesses what structural engineers are to buildings. They produce the chunks of information that allow companies to turn in performance that fetches their top management fat bonuses, but these accountants themselves remain below the radar for the most part.
Even the name of their professional organisation tends to diffuse, rather than sharpen, their identity. Ask anyone what ICAI stands for, and the answer would be, the Institute of Chartered Accountants of India. Well, it is. But it also is the Institute of Cost Accountants of India.
Formerly known as the Institute of Cost and Works Accountants of India, the institute sought to change its official name to the Institute of Cost and Management Accountants of India. This met with objection from the Institute of Chartered Accountants. So, the government dropped the outdated term Works from the institute's name and created a second ICAI.
Some day, hopes the current president of the IC(ost)AI, M Gopalakrishnan, the institute would formally add Management to its name, mirroring the nomenclature his counterparts follow in other countries. But then, as lovelorn Juliet said, what's in a name? Cost accountancy does the solid work of generating, assembling and making sense of the information that companies need about their own working to take intelligent decisions.
As the Indian economy grows, forms more and more companies, and all of them compete with companies from around the world even for a share of the domestic market, the need for intelligent decisions based on thorough knowledge of their own internal working can only increase. And that is why the institute has 50,000 members and oversees the training and qualification of 4,00,000 students who aspire to become members.
Time was when cost accountants were required as essential staff to meet compliance requirements. The government requires companies in eight sectors - telecom, electricity, fertilisers, cement, sugar, petroleum and chemicals including bulk drugs and formulations - to prepare cost audits.
Companies hired cost accountants to prepare these statements. And the vast majority of qualified cost accountants work in the finance wings of companies as employees. But the times are changing. Increasingly, cost audits are inputs to achieving excellence: in management practices, in financial results, in meeting rising shareholder and consumer expectations of respect for the environment and for corporate governance.
Mr Gopalakrishnan is proud of the institute's 28,000-sq-ft centre of excellence at Hyderabad, which periodically trains people in new concepts and established procedure. He stresses that management accounting is gaining importance in the era of globalisation.