Dissertation proposal on financial systems and tax accounting- Havard Style
130 Faculty of Business Economics and Entrepreneurship International Review (2020 No. 3-4)
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SCIENTIFIC REVIEW
ANALYTICAL SUPPORT OF THE MANAGEMENT
ACCOUNTING SYSTEM IN AN UNSTABLE ECONOMY
CONDITIONS
DZOBELOVA Batrazovna Valentina1, DOVTAEV Sayd-Ali Shakhidovich2, KUZINA
Anna Fedorovna3, SHADIEVA Movlatkhan Yusupovna4,
ELGAITAROVA Nargiz Takhirovna5
1 North-Ossetian State University named after K.L. Khetagurova (RUSSIA) 2 Department of Enterprise Economics, Chechen State University (RUSSIA) 3 FSBEI HE “Kuban State Agrarian University named after Trubilin” (RUSSIA) 4 Ingush State University (RUSSIA)
5 North-Caucasian State Academy (RUSSIA)
Abstract
The globalization of the modern economic system, the scarce nature of the resources used,
the depressive and stagnant nature of the current processes, the increasing complexity of the
geopolitical situation and the deterioration of the environmental situation, etc. predetermine a
serious transformation of the functions of accounting services and the role of accounting in
the modern management system.
In these conditions, the need to study the impact of environmental factors on the nature of
the enterprise activity and the mechanism for the development and adoption of managerial
decisions are especially relevant. It is indisputable that the accounting organization system in
a crisis situation should be different from its management in a sustainable development
environment; this determines the need to improve managerial accounting methodology in
conditions of unpredictability and instability of the external environment.
An analysis of the specialized literature suggests that there are insufficient studies of many
aspects concerning the methodological content of the anti-crisis model of managerial
accounting, the construction of its categorical apparatus, and the provision of a managerial
accounting model in crisis processes in the economy, etc., which predetermined the choice of
the topic of our study.
Keywords: economic crises, business entities, anti-crisis management accounting, analysis, information support
JEL: M41 UDC: 657.422
005.332:338.12
COBISS.SR-ID 28657417
Introduction
A characteristic feature of the processes in reforming the accounting system in the Russian
Federation is its focus on rapprochement with generally accepted international standards with
the emphasis on financial, tax and management reporting. Among the most pressing problems
with regard to the development of the conceptual and applied foundations of the current
methodology for management accounting in Russian business structures, we want to highlight
131 Faculty of Business Economics and Entrepreneurship International Review (2020 No. 3-4)
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the transformation of the methodology and objects for management accounting in an unstable
economy.
When speaking about the crisis-functional relationship between management accounting
and other sciences, it should be noted the growing contrast of objects, functions, techniques
and methods of management accounting with the corresponding components of control,
management, planning, etc. in the context of strategic and operational elements. This situation
causes interdisciplinary disunity of management accounting and management accompanied by
organizational and infrastructural underdevelopment, and lack of prognostic orientation.
As a rule, the subject matter of most of the works developed by Russian researchers is
limited and mainly is focused on certain issues of cost accounting and calculating the actual
cost of production. At the same time, many aspects of information support in innovative areas
in management are at best considered but fragmentarily. In these conditions, the problem of
using KPI technologies, compiling integrated reporting, developing a balanced scorecard from
financial and non-financial indicators, etc., remain completely unexplored. Apparently, also
for this reason Russian companies operating in world markets are very often faced with the
situation when their reporting does not meet the information needs of users due to their
inadequate analyticity and relevance.
The high level of discussion nature of various approaches and interpretations regarding the
issues under consideration, forming the conceptual design framework of the management
accounting, has shaped the focus of our study.
Research methodology
The basic principles of the institutionalism theory, managerialsystems, including cyclical
development, crisis management, managerial accounting, and economic analysis became the
theoretical base for the study.
The general scientific methods of cognition, such as system analysis, induction, deduction,
comparison, formalization, etc., wereits methodological basis.
The regulatory framework of the Russian Federation in the field of accounting, IFRS, the
works of domestic and foreign scientists, etc., served as an information base.
Research results
Globalization processes in the world economy objectively imply the development of
modern tools of scientific, methodological and practical support for the sustainable growth of
economic systems, which, undoubtedly, puts them among the most significant tasks in the
state power system and in the scientific community. In the today’s conditions of increasing
competition, economic systems have become more nonequilibrium, which is associated with
additional research in the field of monitoring and controlling the economic processes of the
exogenous and endogenous environment, affecting the development sustainability of both
individual enterprises and socio-ecological and economic systems in general.
A feature of the modern system of accounting and analytical support is its focus on
accounting and analysis of internal information. It is clear that in such conditions almost all
external information (independent of the activities of enterprises) falls outside the scope of
mandatory accounting, which actualizes the unpreparedness of business entities for crisis
phenomena. [1, 4, 8]
All this requires that the analysis of the environmentalsituation in the macroeconomic
instability conditions become an everyday component of management accounting. It seems to
us that this also requires the use of special principles and methods of constructing information
for the development and adoption of managerial decisions, different from those that are
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applied in conditions of sustainable development. In today's realities, it is no longer
impossible not to see that constantly changing economic circumstances can directly affect
accounting and the practice of preparing financial statements. It seems to us that accounting
cannot be seen as a dogma, as something forever established, because it is constantly
influencedby a constantly changing environment.
It should also be noted that, as a rule, the effectiveness of management decisions made in
practice depends on how much an accountant-analyst was able to consider the individual
characteristics of the enterprise. This provision suggests that the constant use of only one
unified approach in the implementation of accounting and analytical actions is not always
appropriate and, moreover, can often lead to the adoption of ineffective management
decisions. We proceed from the fact that an individual (creative) approach consists in the
ability to the fullest extent consider the factors that shape the special aspects of activity of an
enterprise.
Researchers note that the management accounting methodology is more dependent on the
stage of the life cycle, which involves the use of a wide range of tools to implement the
enterprise’s strategic plan at the appropriate development stage [12].
Our analysis of the institutional evolutionary theory allowed us to identify environmental
factors that influence the algorithm for the development and adoption of effective
management decisions and to justify the mechanism for an adequate response to external
market and macroeconomic triggers. In this format, the life cycle theory allows to a greater
extent to consider the features of the strategic management accounting system.
The life cycle of an enterprise depends on its balance with the financial cycle, on the
ability to influence it, and, thereby, steadily and proportionally develop economic systems at
the micro level. In these conditions, the management accounting system must be directed to
leveling internal contradictions that have the nature of organizational properties, as well as
emerging conflicts with external factors when an enterprise moves to the next stage. [15, 17]
To solve the complex of strategic management tasks, portfolio analysis methods, including
such as the Boston Consultancy Group matrix, life cycle matrix (ADL), etc. are actively used
A characteristic feature and commonality of these models is the combination of some
systemevolvement parameters of different levels such as a company, product, or even a
particular sector of the economy.
In our opinion, the strategic goal of any enterprise in the face of increasing competition is
the implementation of such a business model that can enable the generation of sufficient
added value with any environmental changes. This situation implies the need for structuring
the properties of the accounting and analytical system with all kinds of combinations of stages
of the enterprise life cycle.
Being a direct factor in the macroenvironment, any stage of the life cycle itself actively
forms management accounting models and affects the configuration of the methods used that
are generally accepted for the accounting direction under study. In modern economic realities,
stable economic growth can only be achieved through effective management of business
structures at the micro level, subject to prompt and accurate management decisions. All this is
associated with the need to search for effective tools to increase the relevance of the generated
information base.
Let us turn to the consideration of macro environment factors affecting the configuration of
the used management accounting tools. In recent years, the tendency on transformation of the
subject of financial accounting comes into more and more sharp focus. Moreover, if in the
past it was determined by the composition of assets and liabilities in the balance sheet, at the
present stage the market economy itself determines the subject of accountingunder the
influence of cyclical and evolutionary processes. Globalization and structural changes at the
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micro level are accompanied by changes in the tools of operational and strategic management
at the level of individual business entities. [2, 16, 18]
Traditionally, accounting and analytical work has always been aimed at reflecting only the
facts of economic life. At the same time, a complex of macroeconomic factors that are
exogenous with respect to a business entity, which is very important for the financial situation
of the enterprise, was ignored when making management decisions. It seems to us that this
fact cannot be explained by the mere conservatism of the accounting methodology, because
macroeconomic processes unequally affect various sectors of the economy, which makes it
extremely difficult to monitor and control the financial situation of the enterprise. All this
emphasizes once again thata special consideration of the factor of the economy crisis state is
relevant.
The study of the essence of the economic crisis impact on the management system allows
us to note a number of contradictions in the system of accounting and analytical support.
First of all, it concerns the attitude to costs. Under current conditions, there is a mismatch
between the policy of the need to reduce costs due to a lack of own funds and the policy of the
need to increase costs to intensify the business activity of enterprises.
Further, the need to establish anti-crisis funds while escalating the financing of current
operations is controversial.
It is also possible to note certain contradictions in the choice of priorities in the methods of
generating information, in the style and priorities in management, in the stable tendency of the
faster growth of financial and economic technologies over accounting and analytical
technologies; those factors negatively affect the prognostic potential of the generated
information base and thereby strengthen unpredictability in identifying threats and risks of
manifestation of economic crises at both micro and macro levels. [3, 11, 14]
To eliminate the above and other contradictions, we need in new effective methodological
approaches to the development of relevant data in order to provide information-analytical
support for making managerial decisions. Modern accounting methodology is characterized
by increasing integration with tools for generating relevant information in systems such a s
financial management, crisis management, controlling, marketing, economic and
mathematical modeling, statistical and econometric analysis, etc. Undoubtedly, all this form
an additional synergetic effect in the system strategic management of business structures and
thereby expands the subject and functions of management accounting.
In these conditions, in our opinion, the study of the anti-crisis aspect of management
accounting becomes even more relevant. Indeed, in conditions of increasing uncertainty and
instability of macroeconomic processes, which impedes the stable development of enterprises,
it is necessary, first of all, to develop the functions of warning, which anticipate crisis
phenomena in the management accounting system.
Experts note that economic crises violate generally accepted and well-established
approaches to making managerial decisions through a complex impact on the information
support system itself. [7, 10] As an example of such a transformation, we can consider a
change in attitude to assets as an economic category. So, if in modern accounting, the
composition, methods of valuation and recognition of assets are almost the same as they were
fifty years ago, then from the perspective of investments, a number of highly liquid assets
influenced by global financial crises (2008, 2014) became less liquid (these include,
including, real estate, securities, etc.) in today’s realities.
It seems to us that all this should affect the system of accounting and analytical support for
the activities of enterprises. So, for example, it is necessary to modify the management
accounting system to achieve the proper management of assets, liabilities, income and
expenses in the new economic conditions. In addition, it should be noted that in the context
under review, many objects of financial accounting are moving into the sphere of
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management accounting, direct penetration of the constituent methods of financial and
management accounting is performed out.
All this allows us to argue that at the present stage the accounting methodology is subject
to pressure from macro environment factors, which, to a significant extent, modifies the tools
of management accounting.
Indeed, the development of the post-industrial economy is accompanied by evolutionary
processes not only in the system of ongoing business processes, but also by the need to adapt
the management accounting technologies used to the specifics and characteristics of crisis
phenomena in the economy.
All this suggests that the modern methodology of managerial accounting must be adapted
to the functioning of enterprises in the face of increasing competition, quite often
accompanied by a fall in traditional markets. The successful conduct of modern business
requires learning to diagnose the environment, anticipate its depressive development, which
will allow timely identification and subsequent leveling of negative trends for the efficient
operation of the enterprise.
An analysis of the works of Russian scientists suggests that almost the majority of the
developments are devoted to diagnosing the financial situation of enterprises and, at the same
time, the whole set of recommendations for the anti-crisis nature does not go beyond an
enterprise.
In fact, it seems to us that the deteriorating financial situation of an economic entity, in our
case, is not the cause of the crisis situation, but its consequence, because crisis processes
affect not only the finances of an enterprise, but also other areas of its activity, including
accounting tools and the order of production and financial activities of an economic entity.
In the conditions of increasing competition and the instability of economic conditions, the
system of accounting and analytical support for an enterprise should have some flexibility and
adaptability to ensure the use of effective management tools for implementing the strategic
plan and operational tasks of the enterprise.
Among these tools, there can be noted a balanced scorecard (developers – D. Norton and
R. Kaplan). [6] Its use allows managers to have a balanced view of the main production and
financial activity indicators, through which it is possible to reliably evaluate various aspects
of the functioning of an enterprise at the same time. Indeed, a set of various financial
indicators allows us to see the results of the implemented measures and managerial decisions,
but financial indicators alone do not allow us to evaluate the future economic values of an
enterprise. Hence, it must be assumed that the process of strategic management of an
enterprise also requires the development of a certain array of non-financial indicators, which,
together with financial indicators, objectively reflect the actual financial, economic, social and
market situation of the enterprise and its ability to implement a given strategy. [13]
Other models of management accounting and strategic management are also very popular
abroad, including economic added value model, triple reporting system, strategic position
matrix and action assessment, etc.
Among Russian researchers in this area, we may note G. B. Kleiner; he considers the
fifteen functions of an enterprise, including anti-crisis stabilizing function. [2]
In general, we must admit that in times of crisis, an analyst should also pay special
attention to the state of the external environment, because at the present stage, the financial
situation of Russian enterprises to a large extent depends on the influence of external factors.
Conclusions and proposals
In the course of the study, we analyzed various approaches of the conceptual-theoretical
and organizational-methodological substantiation of the management accounting system in an
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unstable economy, which allowed us to identify a wide variety of factors which are the basis
of the genesis of economic development, and at the present stage have a direct impact on the
methodological content of management accounting.
It is proved that the economy cyclical development factor is one of the key ones when
considering approaches to the formation of the management accounting concept. This
situation indicates the objective need to change user requests for relevant information
concerning the development and adoption of effective management decisions in a non-
deterministic environment; it is the evidence that economic crises in the economy
significantly affect, among others, the improvement of the management accounting
methodology.
Using a systematic approach allows us to modify the anti-crisis model of managerial
accounting, and also to level out the resulting disorder in the construction of elements of the
managerial accounting theory, and thereby to develop effective tools for creating relevant
information to work out effective management decisions in the today’sconditions of unstable
economy.
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Article history:
Received 13 April 2020
Accepted 25 August 2020