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

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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