Not eligible for exchange students!
Do you like T-accounts? Do you love huge complicated Excel spreadsheets which tell you what is the right or wrong decision? If this is the case, may be this is not the perfect class for you. This class is about management. Accounting only serves as the basis to provide us with the figures we need to discuss and support decisions. The figures will only be one part of the equation. It will be rare in this class to obtain a mathematically correct solution. We will focus on the behavioral issues of management accounting instead. This will allow us to illustrate some of the real problems of management accounting in large corporations, e.g.
- drowning in huge amounts of reporting information which hardly anybody in the organization understands any more;
- eliminating profitable or strategically important products or services because a management accounting systems which produces endless mountains of opaque figures "proves" these items are not really making money;
- focusing purely on Monopoly money, billing out products and services to the neighboring profit center, thereby ensuring that the own profit center looks great and the year end bonus is assured, forgetting that money can only be earned with outside customers and
- optimizing short term performance measures to obtain the next bonus, forgetting the long term issues the company is facing.
All this does not mean that we will not discuss specific management accounting tools. Actually, we will be discussing a lot of very specific tools and, yes, there will be some Excel spreadsheets waiting for you. However, understanding the tools will be the easy part. After all, management accounting is not rocket science. Unlike in finance, you do not win a Nobel Prize for defining a new way to allocate costs throughout the organization. Applying the tools, realizing the inherent conflict of interests and anticipating the resulting management behavior will be the real challenge. It is here where the theoretically correct solution might not necessarily be the preferred solution. In addition, theoretically correct solutions might look quite different in distinct cultural environments. A German management accountant might have a different idea on how to determine product costs or on the relevance of these product costs for the pricing decision than his American colleague.
With this behavioral approach, the class is meant to prepare you for real world decision situations where your management accountant recommends a certain course of action based on figures only he or she fully understands. In these situations it is crucial that you can ask the right questions, demand that the problem should be analyzed again from a different angle and realize which of the available management accounting tools is suitable for which context.