Accounting Principles Your Company Can Adopt

John Krautzel
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The American Institute of Chartered Public Accountants (AICPA) and the Chartered Institute of Management Accountants (CIMA) have released some management accounting principles that can help organizations around the world to make better decisions. These principles "bring structure to chaotic complexity and empower evidence-based decision-making," says AICPA President Barry Melancon.

The first of the accounting principles issued by the AICPA and CIMA is that communication must provide insight into key business decisions. Insightful communication improves decision-making by providing all parties with the information they need to make better business decisions. Accountants need to consider the needs of decision-makers when sourcing and analyzing information so that they can provide the most useful information. They then need to communicate this information as clearly as possible.

The second item in the list of accounting principles is that information should be relevant. A key component of management accounting is sourcing information that informs decisions. Management accountants need to be able to identify which information is relevant to the decision. Relevant information includes information related to the past, present and future of the situation, as well as internal and external information. Not only financial information is relevant; in some contexts, it is also appropriate to consider information related to environmental and social issues.

Management accountants must also consider the impact on value. This is the third of the accounting principles issued as part of the AICPA and CIMA's guidelines. It is necessary to connect every business decision to the organization's overall strategy and evaluate the value of decisions in this context. To successfully identify the impact on value, management accountants need to analyze information in the context of wider macroeconomic factors. As well as assessing the costs and value-generation potential of decisions, it is also important to consider potential risks and opportunities that the decisions might present.

Finally, the AICPA and CIMA accounting principles highlight the importance of trust in business. Careful accounting builds a reputation for accountability and responsible stewardship. Another way of building trust is to balance short-term business goals against the long-term outcomes of a decision. Decisions should be ethically and socially responsible, as well as financially sound. Taking this attitude to decision-making enhances trust and credibility.

These accounting principles can be applied in many situations and organizations. All the accounting principles emphasize the importance of providing information. Thanks to modern innovations such as big data, the availability of information for management accounting is better than ever, allowing businesses to make better decisions.

By following the accounting principles issued by the AICPA and the CIMA, businesses can improve their decision-making processes and respond appropriately to risks and challenges. In a written statement, AICPA President Barry Melancon recommended that organizations around the world adopt these principles to improve the long-term value of their decisions.


Photo courtesy of renjith krishnan at



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