Executive Director's Message
The RCA Institute has had a busy quarter since the last newsletter.
- Three presentations at the IMA Annual Conference, a presentation at the Association of Government Accountant’s Annual Professional Development Conference, a webcast with the Manufacturing Enterprise Systems Association (MESA), and a presentation at the American Accounting Association Conference.
- The International Federation of Accountants published an International Good Practice Guide titled: Evaluating and Improving Costing in Organizations which reflects many RCA principles and provides a cost maturity continuum model which shows RCA as the most advanced cost methodology available.
- The RCA Institute web site is now a managerial costing reference link on the Federal Accounting Standards Advisory Board website,
- Work has begun on an RCA Educational podcast series that will soon start to be released.
- I am aware of 3 RCA implementation efforts that have started this quarter, and know of 1 case study underway in a Chinese manufacturing company.
- A paper is in being written that details the benefits RCA can provide to companies that are adopting Lean production/service techniques in their operations.
A critically important part of the RCA message is the principles that form the foundation of the approach. These principles are relatively unique to RCA, but they shouldn’t be. They are really principles that apply to management accounting more broadly in support of decision science.
A critical shortfall for management accounting is the lack of a conceptual foundation that indentifies the principles and the criteria and constraints which must be evaluated in turning the principles into working concepts for decision support. Financial Accounting has had such a framework for decades and it has served standard setting bodies quite well as they evaluate practical problems for external financial reporting.
Management accounting may or may not benefit from standards, that’s a whole separate debate and it is very hard to frame in an environment were management accounting is nearly always subordinated to the requirements of financial accounting. But management accounting does need to articulate a conceptual framework that clarifies how the basic principles of logic and decision science should be applied to creating management accounting information for business decision support uncorrupted by the principles and standards of financial accounting. A management accounting conceptual framework focused solely on supporting the economic decision making needs of operating managers at all levels inside organizations.
In this newsletter, documents are attached that represent a solid start to creating that conceptual framework in the form of a draft Statement of Management Accounting for the Institute of Management Accountants. I encourage you to read and comment on these documents.
There are also links to the International Federation of Accountants new International Good Practice Guide: Evaluating and Improving Costing in Organizations. This document still attempts to link management accounting for decision support with financial reporting, though it recognizes fundamental conflicts that merit using different information for each purpose.
What do you think about the 2 approaches? Can excellence in management accounting be achieved while it is subordinate to the standards of financial accounting and other regulatory reporting? What challenges is your organization wrestling with to improve it financial decision support for operating managers? What solutions have you used?
Please don’t hesitate to contact me with your thought, ideas, and management accounting issues.
Larry R. White
Executive Director
RCA Institute
Annual Membership Meeting – RCA Institute
We will hold the first Annual Membership Meeting of the RCA Institute on Friday, August 28, at 1:00 PM US Eastern Time. The meeting will be held using Go To Meeting:
1. Link for Web Meeting:
2. Use your microphone and speakers (VoIP) - a headset is recommended.
Or, call in using your telephone.
Australia: +61 (0) 8 6365 4094
Canada: +1 416 800 9290
France: +33 (0) 182 880 457
Germany: +49 (0) 892 2061 163
United States: +1 516 453 0012
Access Code: 159-049-792
Audio PIN: Shown after joining the meeting
Meeting ID: 159-049-792
Annual Member’s Meeting Agenda:
Report on the RCA Institute
- Introductions
- Institute Activities
- Institute Plans
State of RCA Practice
Member Input
Opportunities for Member Involvement:
- Training Development Committee
- Academic RCA Case Development
- PALO Template Review (See article below)
- RCA and Lean – Case Study and Articles
Foundational Principles for Management Accounting
RCA Board members Anton van der Merwe and Doug Clinton have completed the initial draft of the Statement of Management Accounting (SMA) for the Institute of Management Accountants titled First Principles for Management Accounting. A panel discussion was held at the American Accounting Association, the premiere academic accounting conference in the US on Monday August 3, 2009, in NYC. The audience was very supportive of the effort to define a conceptual foundation for manage accounting and several were interested in reviewing the preliminary draft and providing input.
The next step in the IMA’s SMA process is for the IMA’s Foundation for Applied Research to review the draft SMA which will probably result in some redrafting and restructuring prior to IMA publishing it as an Exposure Draft for public comment.
The authors have asked the RCA Institute to include its members in the preliminary review phase of the SMA. Attached below is the overview presentation given to the AAA conference audience and the full draft SMA.
If you are interested in providing your reaction or comments, please send them to and I will pass them on to the authors.
Groundbreaking International Good Practice Guide from Professional Accountants in Business Committee of International Federation of Accountants
The International Federation of Accountants has published the new International Good Practice Guide (IGPG) titled Evaluating and Improving Costing in Organizations.
Link:
The RCA Institute was a principle member of the task force that reworked this document after its initial exposure draft in the Fall of 2008. Most significantly this document recognizes the principle of causality as the primary driver for costing approaches to create decision support information and also recognizes inherent conflicts between costing information for decision support and costing information for financial reporting.
A companion piece to the IGPG, Costing Levels Maturity Model, primarily drafted by Gary Cokins recognizes RCA as the most comprehensive costing approach available today. It ranks RCA as the most mature costing methodology, just short of full simulation.
Link:
While the RCA Institute is not in total agreement with either of these documents, we recognize them as significant steps forward for defining the of practice management accounting in terms of principles focused on decision support rather than being a supporting component of financial accounting.
Webcast - Resource Consumption Accounting: Linking Operations and Finance to Drive Business Performance
On July 9, 2009, Executive Director Larry White was joined by RCA Institute member, Mark Arrieri, Controller, US Technical Products Neenah Paper Munising Mill, and Wolfgang Droeller, Manager, macs software North America to present a webcast to the Manufacturing Enterprise Systems Association (MESA). The focus of the webcast was Neenah Paper’s RCA Implementation and how it had improved decision making information by improving communications between operations and corporate business managers with clearer insights into the cost components associated with profit margins on product and customer dimensions.
MESA will be providing the RCA Institute with a copy of the webcast for members to view; however, I can immediately provide members the slides from the webcast which contain pretty extensive speaking notes. Please Email if you are interested in getting a copy. (The file is too large to imbed in this newsletter.)
RCA Article in Journal of Corporate Accounting and Finance
The Journal of Corporate Accounting and Finance has finally provided an electronic copy of Executive Director Larry White’s article, Resource Consumption Accounting: Manager Focused Management Accounting, published in April 2009. This article introduces RCA by relooking at the basic objectives of management accounting.
I think you will find it a useful introduction to RCA and RCA thinking.
Open Source Solution for Resource Consumption Accounting
The RCA Institute will soon make available a template for a small scale RCA model using the open source business intelligence software, PALO, distributed by Using the template will require downloading the PALO software. A user guide will also be available for the template.
This template and the PALO software are suitable for doing RCA at small businesses with a limited number of resource pools and products or services.
I’ll send out an Email to all members, as soon as this tool becomes available. The template is already being used in some small companies that have implemented or are implementing RCA.
RCA Educational Podcasts
Two educational RCA podcasts have been produced. They are titled: What is RCA? and RCA Principles, Part 1. The intention is produce a series of podcasts that explain RCA in 5-15 minute chunks of time.
The podcast should be posted to the website in the next few weeks. Members will be notified of the availability of the podcasts as soon as they are placed on the website. Your feedback would be valuable in establishing the topical agenda for future webcasts. What questions do you have or are you asked about RCA that would benefit from a explanation in the form of a podcast?
RCA and IFAC’s Sustainability Framework
RCA received mention in the International Federation of Accountant’s Sustainability Framework as a method to support the benefits of implementing sustainability initiatives. There is a link to the RCA Institute imbedded in the document.
Link:
You may also find a companion information paper titled, Professional Accountants in Business—At the Heart ofSustainability?, interesting. It was sponsored by the PAIB Committee and focuses on the accountant’s role when working inside an organization, rather than as a public accountant or auditor.
IMA Presentation Results
The RCA Institute presented 2 sessions at the IMA Annual Conference, and we just received feedback from attendees.
Two Hour Workshop: Decision Support Using Resource Consumption Accounting
- 22 people attended, 17 submitted critiques. All thought the session was well organized prepared, and delivered and agreed the Institute should be invited back to speak next year.
Concurrent Session: Resource Consumption Accounting in Practice
- 55 people attended, 21 submitted critiques (it was late in the day). All thought the session was well organized, prepared, and delivered. 17 thought the RCA Institute should be invited back to speak next year, 4 people said they didn’t know, none disagreed.
If you have an event where you think a talk or workshop on RCA would be appropriate, please don’t hesitate to let me know. The Institute will make every effort to support you with a speaker or presentation material.
Upcoming RCA Presentations
Confirmed:
IMA Nations Capital Chapter, 18 December 2009, Dinner Meeting at Holiday Inn Rosslyn, Arlington, VA, Link:
IMA Chapter Charlotte, NC, 6 March 2010, Pre-Dinner Seminar 3-5 PM
Link:
Pending:
IMA Annual Conference, Baltimore, MD, Marriott Waterfront, 5-9 June, 2010
AICPA Controllers Workshop, Las Vegas, NV, 21-22July, 2010
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