This episode of the FM podcast focuses on the newly updated Global Management Accounting Principles (GMAPs). The principles, first released nearly 10 years ago, provide a framework for management accountants. The most recent version updates that framework to reflect new business realities. David Hackett, an AICPA & CIMA technical manager, looks back at the previous version of the GMAPs and explains some of the key updates.
The GMAPs, scheduled to be featured in detail at a session Wednesday at AICPA & CIMA ENGAGE 2023, are designed to lead management accountants and their organisations to better decision-making.
What you’ll learn from this episode:
- An explanation of the GMAPs.
- A timeline of the most recent update to the GMAPs and some of the changes that spurred the update.
- Some of the external factors leading to a need for more agility, according to Hackett.
- How a management accountant can use the GMAPs to solve problems.
- The GMAPs’ application to wider business and not just finance.
To comment on this episode or to suggest an idea for another episode, contact Neil Amato at Neil.Amato@aicpa-cima.com.
Transcript
Neil Amato: Welcome back to the FM podcast. This is Neil Amato. Our guest today is a colleague of mine, a London-based colleague. His name is David Hackett and he’s a technical manager at AICPA & CIMA. We’re going to talk today about the Global Management Accounting Principles, or GMAPs, and what they mean for finance professionals today. So first, David, welcome to the podcast. If you could tell me leading off, what are the Global Management Accounting Principles and what is their purpose?
David Hackett: Thank you, Neil. The Global Management Accounting Principles are essentially about applying management accounting in practice. The principles are the art of thinking and the art of doing. They provide a really important guide for management accountants and how they operate in all situations within their discipline, and their purpose is really to make sure that their skills and their abilities come to the fore in their chosen organisation.
Amato: That’s a good way to set the stage. Could you also, I guess, take the listeners through the timeline of the first release of the GMAPs to where we are today?
Hackett: Yes, of course. Now, surprisingly, management accounting had been running for nearly well over 90 years when a decision was made that actually we really need to define exactly what management accounting is. Now, of course, members intuitively understood what it is and many had done the exams and been in practice for many years, but the council had never actually completely defined word for word what exactly the discipline was.
It was in the early 2010s and eventually in 2014 when we put a definition to the CIMA Council, we were CIMA back then. That became the definition of management accounting. We are now nine, nearly ten years on from that. With the definition, there came an expectation that we need to go into more detail around what management accounting involved and was felt at the time. I think that holds true today that the best way to do that is to define a number of underlying principles about how management accounting is applied in reality, in day-to-day operations.
A lot of work was done back in 2014 under the first guise of the management accounting principles. That was released to great fanfare and in fact, was one of the most downloaded documents that we had on our website as CIMA, before we emerged as the Association. Moving forward to the 2020s, inevitably, a lot has changed in practice. A lot has changed in geopolitics in the landscape that we’re operating today. There was a feeling within the organisation and within the membership, that it was time to have a look again at the principles and just make sure that they were fit for purpose. Henceforth, we revised the Global Management Accounting Principles and the document is now to be published a second time. The new principles are the most up-to-date and the most relevant to practice today.
Amato: We will get into some of the new business realities, I guess, that figure into those changes, but the first thing I guess I’ll go to is the four main principles. Could you name them and then also go into a little bit of detail about each of them?
Hackett: Yes, of course. The first principle that we have is communication, a communication that influences and creates impact. Now, when we first looked at the definition of management accounting and what we do, we realised that we couldn’t actually do anything within the discipline without being able to really clearly articulate and communicate information. It was felt that communication needed to be the first principle.
Now building on that in the second edition, what we’ve talked about is communication that creates influence and impact. Because what we realised is communication is all very well but there’s a lot of, I guess, a lot of times where communication happens, but it doesn’t actually change things. Management accounting is fundamentally about driving decisions and driving change that creates value. We’ve refined the principle about communication to include that it creates impact by driving better decisions and helping to execute a strategy at all levels of operations. It’s a little bit more all-encompassing.
The second principle, which is unchanged from the first edition, talks about information that is relevant. We discussed in this update whether that needed moving on and changing but what we actually understood and what we realised is that actually, this principle is more important than ever because the sources and the veracity of information, whether to trust that information with all of the new technology that’s available now is increasingly important. It’s really important that management accountants have ownership of that principle in terms of providing information that’s relevant, not all of the information that’s available, but parts that are relevant to businesses and helping them to execute the strategy in the right way to drive value. That’s why we’ve kept that principle because we’ve realised how important it is.
The third principle talks about, well, what do you do with that information? We have communicated that we’re creating impact, we’ve got the right information. The third principle, very core to management accounting, is about analysis and making sure that with that information, we can infer and we can draw a conclusion. We can tell a story about the information that is relevant and has a cause-and-effect relationship and leads to a number of potential outcomes.
Analysis is still there as a key, where we’ve added to it is that we now talk about analysis that generates sustainable value. Perhaps in times gone by, it was really about the bottom line, it was about monetary value. While that’s still absolutely key, I think there’s a move in the current market towards a view around sustainable value so that we’re creating that value, not just now, but for the future and keeping the business going. We mean sustainable in a very broad sense to include all of the capital, financial environments, social, all of those, making sure that they’re all available for the business on an ongoing basis. The third principle is around analysis that’s generating sustainable value.
The fourth and final principle is that, and this is an idea of a cycle, right, so we’ve communicated, we’ve got the relevant information, we’ve analysed, and we’ve analysed the right information to come to conclusions. We’re now using that and we’re stewarding the business to build up trust. Stewardship builds trust is our fourth and final principle. That’s really about managing the relationships, the resources, the assets, and the reputation of the organisation to ensure that the value is enhanced. It’s not just about a one-dimensional approach, but making sure that we’ve got that broad stakeholder relationship because I think we understand as management accountants that no organisation can act alone.
We’re all part of a wider society. It’s really important that society as a whole understands the value that we’re bringing as a business. So, there are the four principles, and we will talk about them in a cyclical way, with the idea being that value still remains at the center of those principles. They’re all about creating, preserving value.
Amato: You mentioned obviously the change, including that word sustainable and all the things that means regarding the multiple capitals, so what else would you say are the main changes that may have to do with some of the things we as a society have gone through, whether it’s the pandemic or the push to remote work, what are some of the new business realities that I guess that figure into the changes in this current edition?
Hackett: A lot of things have changed in the business environment over the last decade. You mentioned one, which is the effect of the global pandemic. I would add to that the changes in technology that have enabled much more flexibility and has really meant that we’ve needed more agility as management accountants to be able to work in different ways, and to look at data in different ways.
Another one as being the pace with which data analytics and artificial intelligence and some of the technology there has really come forward, which has meant that, I mentioned this talking through the principles, the way that information is still there, but it’s much more available and there’s many more technologies which are all competing to give you different information. It’s about navigating your way through that.
That landscape is substantially moved on. I would also talk about the move to ESG. As the Association, we’re really strong on the environmental, social and governance and considerations that are coming to the fore in terms of new regulation and reporting, that’s really moved on a pace, particularly in the last three or four years so organisations really need to be understanding what those regulatory changes are and how they might want to adapt their business models within those frameworks.
Yes, a number of changes there. I would also add particularly within this edition, we’ve linked in a way that perhaps we hadn’t done so much in the first edition, we’ve linked to our wider research. We’ve done a lot of research around business model frameworks. We’ve done research around environmental and social guidance and governance. We’ve done research on agility. There’s a whole suite of research we’ve done as the Association and the new principles build on that and unrelated across to some of those topics as well, which makes it a fantastic new edition.
Amato: What would you say are the benefits to finance professionals, management accountants, of applying the GMAPs to the work that they do?
Hackett: We can look at it in two ways. When you’re starting out as a management accountant, you’ve done your exams, you’ve done your qualifications, you probably have a good theoretical understanding of how management accounting works and what it does. But in terms of day to day, we’ve all been there, we’re in a new job. How do I actually apply all of that knowledge? The management accounting principles are a really good framework to really look at a problem, look at an issue that you may have within your remit, within your finance function and say, how do I think about that?
We can take the GMAP framework and we can look at the problem, and we can put it through those four principles. We can start to really take our thought process through those principles and then look at some of the actions that we might want to do as a result within each of those principles. It can be really helpful in that way. Then as we go through our careers and we perhaps get to senior finance role or a board role, we may want to look again at the principles and perhaps look at them in a different perspective.
Perhaps using them to look at a major business decision or an investment decision that we might have to make and think, well, how do I think about this? How is this going to, how’s this going to have an impact? How do I communicate this? Have I got the relevant information? What have I analysed here? Have I built that stakeholders’ stewardship trust that the principles call for? It could be really helpful in terms of taking you through a thought process and allowing you to contribute to the discussions around a decision that you might be making in a more senior role. There’s a couple of examples of how you might use the document, the framework there in completely different stages in your career.
Amato: In the show notes for this episode, we will have a link to the Global Management Accounting Principles. David, I appreciate your time explaining this today. What else should listeners know about the GMAPs?
Hackett: The GMAPs cover a whole variety of management accounting concepts. They start with the definition and the purpose. They move on to talk about issues which are key to management accountants, such as performance management. How you might look at measuring your performance as an organisation. There’s a whole chapter there, Chapter 3, which looks at how you might apply those.
It also links very well to the competency framework. We revised as an organisation our competency framework, and our syllabus for the exams in 2019. The GMAP dovetails really well with some of the core competencies that you acquire as a management accountant. That’s really important. Another concept I’d highlight is the use of indicative behaviours. The GMAPs are really good at showing what behaviour we’re trying to drive as a management accounting professional.
There’s some really good examples. They’re not exhaustive, but they are examples of the ways that you might want to be effective in terms of the discipline of management accounting. Then I’d also say that what the release of the new GMAPs is also about, and you may see presentations and they’re also executive summaries and the like, but it is also a document that can be used again and again as a reference document if you’re really not clear on what you should be doing or you perhaps haven’t quite understood a concept, or you need refreshing at any point, you can always go back to the document. It’s very thorough.
If you look particularly at Chapter 5, it lists all of the practice areas within the management accounting discipline. You can really start to understand the breadth of what might be in your role, what might be required. I’d really encourage anybody with an interest in management accounting to have it there as a link or as a reference document printed out if they wish and refer to it.
Amato: That’s great. Again, on the FM podcast episode page, we will have a link for download. David, anything else you’d like to add?
Hackett: What I’d also say is with this second edition, the principles are much more than around the operations within finance. They’re really looking at the wider business and they’re about applying a set of skills around business leadership. The principles can be applied to the wider business, not just within the finance function.
Amato: That’s a great way to end. David Hackett, thank you very much.
Hackett: Thank you.
