Strategic Management Accounting Flashcards

The 'Beyond Budgeting' management model primarily advocates for:

Answer: Replacing fixed annual budgets with adaptive, rolling forecasts and decentralized decision-making

Beyond Budgeting replaces the rigid annual budget with dynamic, forward-looking forecasts and empowers frontline managers to respond to changing conditions.

Shareholder Value Analysis (SVA), as developed by Alfred Rappaport, defines value creation as maximizing:

Answer: The present value of expected future free cash flows

SVA holds that a company creates value only when it generates free cash flows whose present value exceeds the capital invested.

In the Balanced Scorecard framework, the 'learning and growth' perspective primarily measures:

Answer: Employee skills, information systems, and organizational culture

The learning and growth perspective addresses the intangible assets — human capital, information capital, and organizational capital — that enable strategy execution.

Strategic variance analysis extends traditional variance analysis by:

Answer: Identifying variances attributable to changes in strategic assumptions, competitive position, and market conditions

Strategic variance analysis separates performance variances into those caused by operational execution versus those caused by shifts in the competitive environment or strategic assumptions.

Lean accounting supports lean manufacturing environments by:

Answer: Eliminating non-value-added accounting activities and using value-stream costing

Lean accounting removes wasteful accounting processes and replaces product-level standard costing with value-stream income statements that better reflect lean operations.

A key limitation of Return on Investment (ROI) as a divisional performance measure is that it:

Answer: May cause managers to reject projects that reduce divisional ROI but increase total company value

ROI creates a goal-congruence problem because a manager whose division already exceeds the company's target ROI will reject positive-NPV projects that would lower the division's ROI.

The Hoshin Kanri strategic planning system is primarily designed to:

Answer: Align organizational goals, departmental activities, and individual efforts with top-level strategic priorities

Hoshin Kanri (policy deployment) cascades strategic objectives from top management down through every level of the organization to ensure coherent, coordinated execution.