An organization's managerial accounting system design can help or hinder the journey toward completing the full vision of performance management as we have been defining it in this monthly column. Understandably, people with nonfinancial backgrounds and training have difficulties understanding accounting; for many of them, accounting is outside their comfort zone. But a gathering storm in the community of management accountants clamoring for so-called advanced accounting techniques (e.g., activity-based costing, resource consumption accounting, lean accounting) is confusing even the trained accountants and seasoned practitioners. What is the problem?

The fields of law and medicine advance each decade because their body of knowledge is codified. Attorneys and physicians stand on the shoulders of their predecessor's captured learning. In a sense, financial accounting's generally accepted accounting principles (GAAP), although varying from country to country, also have codified rules and principles (though with lots of loopholes) to support external reporting for government regulatory agencies and bankers. Unfortunately, unlike financial accounting with its codification, managerial accounting has no such framework or set of universal standards. Accountants are left to their own devices, which are typically the methods and treatments inherited from the accountants they succeeded at their organizations. Accountants burn the midnight oil with lots of daily problems to solve, so they infrequently get around to improving or even reforming their organization's management accounting information to benefit their managers and employees. The escalation of global compliance reporting, such as with Sarbanes-Oxley, majorly distracts from investing time in evaluating improvements to the organization's managerial accounting system.

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