PAS 1919: Is a standardised approach suitable for management accounting?

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Massimo Picciallo
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Following recent news that the British Standards Institution has launched the world’s first management accounting standard PAS 1919, Massimo Picciallo, CPM business unit team leader at Talentia Software, discusses what this means for the industry.

The BSI (British Standards Institution) recently launched a new voluntary best-practice guide, PAS 1919, designed to define what “good” looks like for in-house accounting. The move has piqued the interest of management accountants as this is the first standard of its kind to be launched in the UK, and signals BSI’s first venture into the accounting sphere.

The standard aims to enhance decision making and company performance by offering a framework for those working in a management accountancy function, or someone in the senior management team.

The proposed role of PAS 1919 is to provide guidance for organisations on assessing the performance of the management accounting function. It covers four management accounting principles, ensuring those adhering to the standards are: communicating insight that is influential; ensuring information is relevant; making sure the impact on value is analysed; and building trust by balancing short-term commercial interests against long-term value for stakeholders.

One size fits all – will PAS 1919 deliver across the board?

Despite being a positive first step towards a standard that could play an integral role in the world of finance, the guide has so far received a lukewarm reception from the industry. The most notable criticism has been that moving towards a standardised set of rules highlights a shift away from historical practices.

This has caused concern as traditionally a bespoke approach is considered best practice due to the complications caused by applying the same standards to businesses in different sectors and of varied sizes. Every industry works to a different model, a considerable hurdle in promoting this guide to a wider market.

Another concern from the industry is related to the cost of the new standard. Although charging for a best-practice guide of this variety is commonplace, this has been positioned to the market as a standard, receiving endorsement from the Chartered Institute of Management Accountants (CIMA). Although the fee is relatively low at £80, it has become a sticking point for many, who believe that a true standard would freely encourage the sharing of best practice.

A step in the right direction – revolutionising management accounting

A one-size-fits-all approach, designed for the entire accountancy market, is unlikely to cause a tidal wave. If we look to PAS 1919 as a conversation starter for an industry that has lacked any structure and guidance in managing its own performance, then it does offer a helpful starting point and the beginnings of a foundation. Company evaluation is no easy task, and if this guide can act as a driver for more industry and size-specific standards in the future, it will undoubtedly serve to make the life of a management accountant easier and more efficient.

In the short term, PAS 1919’s real utility can be put to the test by applying it to highly regulated companies where there is no other option but to follow a best-practice approach. This would allow the BSI to test the guide’s success and iron out any issues raised. The same approach could be applied to a company under administration or financial difficulty, where the guide could be used to evaluate a company’s progression. There is no doubt that trying to turn something with requirements as unique as management accounting into a standard will be a huge undertaking, however, it is an encouraging first step in ensuring the internal health of a business and its future.

Massimo Picciallo is CPM business unit team leader at Talentia Software

About Massimo Picciallo

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25th Jul 2016 12:29

Standarisation of MA would certainly help in M&A. In case of business transfers it would save vendors much time / effort answering due diligence questions and providing information to acquirers.

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