Continuing its role to provide thought leadership to the profession, IMA® (Institute of Management Accountants) recently released The Profitability Analytics Framework, a new Statement on Management Accounting (SMA). The SMA introduces the Profitability Analytics (PA) Framework, which classifies how management accountants can utilize the framework and technology to become more effective business partners and actively participate in their organization’s strategy development and execution.

“It is critical that management accountants expand the range of their analytic capabilities in the digital economy,” said Raef Lawson, Ph.D., CMA, CPA, vice president of research and policy at IMA.

The PA Framework provides guidance on approaching the new world of analytics for internal decision support beyond Generally Accepted Accounting Principles (GAAP) and financial accounting systems that support regulated financial reporting. It incorporates modern revenue management techniques, modern costing focused on internal decision support, and a view of investments as both tangible and intangible.

It is composed of three primary elements:

  1. Strategy formulation, where an organization establishes its plan for identifying and addressing its market(s) and for mobilizing its resources to meet the demands created by that plan.
  2. Strategy validation through the use of causal models. These models employ the principle of causality to quantify in operational terms, monetize the revenues and costs of the organization’s strategy, and then track the execution and performance of that strategy.
  3. Strategy execution involves decision making that employs the outputs of the causal models to provide the organization’s decision makers with the accurate and relevant information they need to make economically sound decisions as they execute plans and adapt tactics to meet strategic goals.

“The PA Framework provides management accountants a guide to becoming more effective business partners and participate more comprehensively in the organization’s strategy development and the optimal execution of the developed strategy,” said Larry White, CMA, CFM, CSCA, CPA, CGFM, executive director for the Resource Consumption Accounting Institute and former IMA Global Chair. “This framework provides a roadmap to make management accounting more valuable and advance the accounting profession. The skills and knowledge of management accountants are ideally suited to support increased profitability by facilitating innovative information, insight, and technology use across an organization.”

The new SMA provides a platform to extend the broader concept of profitability and ensures that the capabilities of management accountants are fully realized. It incorporates current IMA knowledge and products and focuses them to provide a greater depth of insight into profitability analytics.

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