Performance Measurements Of CIFA and CIMA Accounting Essay


Today, public presentation measurings contribute to the accurate and equal appraisal and rating of the organisational public presentation. The range of application of new measuring tools and techniques to maximise the truth of the public presentation measuring grow steadily, while many organisations implement new measuring tools en masse. In actuality, CIFA and CIMA are public presentation measuring techniques, which focus on cardinal issues related to the public presentation of organisations. The usage of different public presentation measuring tools contributes to the equal appraisal of the current place of organisations and their competitory environment. However, the effectivity of traditional public presentation measurings is under a inquiry. Hence, companies need to implement new, more effectual measurings, such as CIMA and CIFA, to carry on accurate and equal measurings of their public presentation.

Traditional Performance Measurements

The fiscal accounting based on the public presentation measuring is important for the concern development and betterment of the organisational public presentation due to the equal appraisal of the current place of the mark company. As a regulation, companies focus on the measuring of cardinal fiscal statistics and ratios, such as the degree of grosss, net net income, liabilities, and others. Due to the analysis of cardinal fiscal statistics, the fiscal accounting can be measured accurately. Otherwise, the hazard of the unequal appraisal of the current fiscal place of a company arises. Hence, the hapless appraisal of the fiscal place and public presentation of the organisation can raise many jobs. At this point, the hazard of the hapless prediction of the fiscal public presentation of the organisation is one of the gravest jobs organisations may confront. The proper fiscal accounting and its measuring lays the foundation to the accurate and dependable prediction and planning of the fiscal development of the organisation.

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The direction accounting focal points on the effectual direction of the accounting system. In add-on, the direction accounting based on public presentation measuring allows uncovering the extent, to which the direction accounting is effectual at the minute. On the other manus, the direction accounting has the Limitation of Traditional Performance Measurement and its disadvantages and failings. In fact, traditional public presentation measurings are grounded on quantitative methods of analysis, which are non ever effectual. Quantitative methods of analysis do non ever let carry oning the equal appraisal of the organisational public presentation from the qualitative point of position, whereas the quality is important in the modern-day concern environment. Therefore, modern organisations have to unite both quantitative and qualitative methods of analysis.

Another traditional public presentation measuring attack is the activity-based costing accounting, which focuses on the analysis and critical rating of the activity public presentation of organisations. This attack focuses on specific activities of organisations and assigns costs to these activities ( Rejc, 2004 ) . Costss are assigned to each activity and the effectivity of activities and effectivity of investings are measured on the land of the return on investings and revenues the organisation obtains from each activity, taking into consideration costs the organisation has spent on the activity. As the affair of fact, this attack is rather effectual but it bounds the measuring to specific activities. In such a state of affairs, organisations face significant troubles with the equal appraisal of their overall fiscal public presentation because they focus on specific activities but non on the organisational public presentation at big ( Boxall & A ; Purcell, 2000 ) . At any rate, costs are assigned to activities irrespective of the general scheme of the organisational and concern development. In such a state of affairs, the ABC turns to be non really efficient, particularly if organisations operate in a quickly altering concern environment. In add-on, this method of public presentation measuring provides organisations with fragmental information about their public presentation and organisations need to garner the information collected in footings of the ABC and procedure it, analyze it to obtain dependable information on their selling and fiscal public presentation. Therefore, this attack is labor- and time-consuming.

Accounting for fixed assets is another traditional public presentation measuring and attack to accounting. In fact, the accounting for fixed assets focuses on the measuring of fixed assets of organisations, which comprise the nucleus of the marketing value of organisations. On the land of the measuring of fixed assets and alterations in the fixed assets of organisations, the appraisal of their selling and fiscal public presentation occurs. This method used to be rather effectual in the yesteryear, when fixed plus comprised the major portion of the marketing value of organisations ( Lancer & A ; Holzer, 2001 ) . However, in the modern-day concern environment, when organisations operate internationally and, when fixed assets comprised the portion but non the chief one of the marketing value of organisations, this method is non ever dependable ( Lancer & A ; Holzer, 2001 ) . In the modern-day concern environment, trade name and human resources comprise an built-in portion of the marketing value of organisations but they are non fixed assets. Therefore, modern organisations can non disregard the value of trade name and the potency of human resources, while mensurating their public presentation what is really the instance when accounting for fixed assets occurs. As a consequence, this method is non applied en masse today, alternatively new, more advanced and efficient methods of public presentation measuring are applied.

Modern Performance Measurement

Modern public presentation measurings are based on CIMA and concentrate non merely on the quantitative analysis of the organisational public presentation, but besides on the qualitative measuring of the organisational public presentation. Modern public presentation measurings contribute to the wide appraisal of the organisational public presentation and effectivity of operations conducted by an organisation.

The high efficiency of modern public presentation measurings consequences from the effectual appraisal of the quantitative and qualitative public presentation of the organisation ( Boxall & A ; Purcell, 2000 ) . The quantitative analysis comes foremost. On the land of this analysis, an organisation assesses its current place in the market. After that, the qualitative analysis accomplishes the measuring and its results are extrapolated on the results of the quantitative analysis to uncover possible jobs in the organisational public presentation.

Modern public presentation measurings can get the better of the restriction of Traditional Performance Measurement ( Pollitt & A ; Bouckaert, 2001 ) . To set it more exactly, through the wide range of the measuring, modern public presentation measurings outweigh failings of the traditional public presentation measuring. Modern public presentation measurings are non bound to the quantitative appraisal of the organisational public presentation but besides these measurings involve the elaborate qualitative analysis, which helps to place the full range of the organisational public presentation and its effectivity.

In this respect, modern public presentation measurings are really effectual and contribute to the accurate planning of the organisational public presentation and its direction ( Lancer & A ; Holzer, 2001 ) . At this point, the development of effectual tools and techniques facilitates the procedure of measuring and increases the dependability of its results. As a consequence, modern measurings are more effectual than traditional 1s.

On the other manus, modern public presentation measurings systems themselves have failings and restrictions because there is ever a hazard of mistake, particularly, when the qualitative analysis is conducted ( Tompkins, 2001 ) . But this job can be easy eliminated, if the organisation expands the range of the analysis and uses multiple methods of the qualitative analysis.


In the modern-day concern environment, the fiscal analysis affects systematically the public presentation measuring of organisations because the fiscal public presentation of organisations comprises an built-in portion of their selling public presentation. In this respect, the development and execution of effectual tools of the public presentation measuring concentrating on the fiscal public presentation of organisations is important for the accurate public presentation measuring and equal analysis of the organisational public presentation.

CIFA is another tool that can be used along with or alternatively of CIMA. In fact, CIFA is grounded on the usage of several tools of the public presentation measuring, which focus on the fiscal public presentation of an organisation ( Behn, 2003 ) . CIFA involves the fiscal statement as one of the major tools of the measuring of the fiscal public presentation of an organisation. The fiscal statement is a formal record of fiscal activities of an organisation, which allows the organisation to measure its current fiscal public presentation and calculate its chances in the farther concern development ( Behn, 2003 ) .

Furthermore, income statement is besides of import for CIFA. The income statement is a fiscal statement that grosss are transformed into the net income of an organisation ( Carter, 2003 ) . In fact, the income statement allows an organisation to specify its income and develop the farther program for the investing. In add-on, companies frequently use net net income as one of the tools of CIFA, which includes the gross net income subtraction overheads subtraction involvements collectible plus/minus one off points for a given period.

Furthermore, big organisations, such as transnational corporations, usage consolidate fiscal statement to mensurate their public presentation. The consolidate fiscal statement comprises fiscal statements of the parent company and its subordinates ( Rejc, 2004 ) . In add-on, organisations use the analysis of hard currency influx and escape to analyse their current fiscal place and to mensurate their public presentation.

Furthermore, balanced scorecards accounting is another public presentation measuring tool, which allows organisations to mensurate their fiscal public presentation. At this point, it is of import to put accent on the fact that organisations can utilize balanced scorecards for the appraisal of their fiscal public presentation. For case, organisations can make balanced scorecards, where they take into consideration cardinal fiscal features within the set timeline ( See App. , Table 1 ) . For this intent, organisations need the balance sheet. In add-on, the instance survey of the mark organisation may assist to carry on equal analysis utilizing balanced scorecards. The usage of the instance survey and balance scorecards allows organisations to carry on the elaborate analysis of the fiscal public presentation and, what is more of import, to finish the analysis and to mensurate the effectivity of their public presentation.

At the same clip, balanced scorecards are applicable non merely in footings of the quantitative analysis but they are besides applicable to the qualitative analysis ( Tompkins, 2002 ) . For case, organisations can analyse and mensurate the effectivity of their public presentation in footings of company-customer relationship. In the modern-day concern environment, company-customers relationships are important because they determine the place of companies in the market and the popularity of their trade name. In broader footings, company-customer relationships define the selling public presentation of organisations.

In add-on, the Economic Value Added is frequently used by modern organisations to cipher the true economic net income of organisations. In fact, specializers ( Littman, 2002 ) believe that this method is really efficient and dependable method of fiscal analysis. The economic value added is calculated as net operating net income subtraction a charge for chance cost of the capital invested. As a regulation, this method is frequently applied in investing undertakings. For case, when investors want to mensurate their fiscal public presentation of the mark organisation, they can utilize the EVA to mensurate the sum by which net incomes exceed or fall short of the needed minimal rate of return of stockholders or loaners ‘ comparable hazard. EVA can be measured at the divisional degree that makes this method of public presentation measuring flexible. Another illustration of utilizing EVA is puting organisational ends. At this phase of concern development, EVA contributes to the adequate and accurate appraisal of the current selling and fiscal public presentation of the organisation. On utilizing EVA, organisations can specify their basic ends, understand possible minimum hazards and expected return on investings. However, specializers ( Tompkins, 2002 ) recommend utilizing EVA in a combination with other public presentation measuring tools to increase the efficiency and truth of measurings. At the same clip, specializers ( Boxall & A ; Purcell, 2000 ) point out that modern methods of public presentation measuring are more efficient and dependable in the modern-day concern environment because they are flexible and allow organisations to carry on both quantitative and qualitative analysis. In add-on, modern organisations prefer to carry on the perpendicular analysis, which allow them to compare their public presentation to that of their rivals. In contrast, traditional public presentation measuring tools focus on the horizontal analysis, which allows analysing the organisational public presentation in the class of the set timeline.


Therefore, the public presentation measuring plays an of import portion in the development of modern organisations. The public presentation measuring can trust on traditional measurings every bit good as CIFA and CIMA. The latter are more advanced and widely-spread today, due to their higher dependability and efficiency compared to traditional measurings. In fact, CIMA provides the wider range for the analysis of the place of an organisation and measuring of the public presentation of the organisation, whereas CIFA focuses on the fiscal public presentation chiefly. In such a manner, CIFA has certain restrictions and a narrower range compared to CIMA. In this respect, CIMA is more effectual as a tool of the public presentation measuring. In add-on, CIMA has a combination of public presentation measuring tools, which helps to carry on equal and accurate analysis of the current place of organisations and their public presentation.


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