CIMA's Chief Executive, Charles Tilley FCMA, CGMA, was recently published in the 'Financial Times' newspaper outlining the benefits of CIMA and management accounting in helping improve productivity in UK firms.
Read the full letter below.
'Sir, The claim that professional services are the root cause of the UK’s productivity problem (April 20) raises a challenge for accountants, who make up a large chunk of the sector. It’s a challenge to which I am happy to respond.
Both the media and the statisticians are oversimplifying the concept of productivity. They fail to take into account that most of the value created by service-led industries is 'intangible', meaning they often drive benefits in areas that may not show up on balance sheets, such as intellectual property or brand. This creates problems if you wish to reduce a service sector to a simple number.
Intangible assets account for two-thirds (64 per cent) of the true, total value of UK companies, with more than GBP1tn of those assets remaining undisclosed on balance sheets, as revealed in the recent report 'The Value of UK plc', launched by Vince Cable and produced by Brand Finance and CIMA. The report specifically highlighted that failing to account for intangibles undermines the professional services sector and consequently the service sector-dominated UK economy.
It is for this reason that CIMA strongly advocates “integrated reporting” — using narrative reporting as well as financial reporting to tell the whole story of an organisation’s value creation.
This is not to say there is no problem with professional services productivity. It is that the picture is much more nuanced than the data or headlines allow. The third global management accounting principle is 'information must be relevant' — but in this case, the information relied on is not sufficient. To meet the challenges of both public and private sectors, we need more management accountants in more senior positions.
Management accounting does not just report on past performance but takes all relevant information into account to produce forward-looking strategy. Far from being the 'root cause' of the problem, management accounting is the professional service that can truly tackle the productivity challenge facing UK plc.
Charles Tilley FCMA, CGMA
The Chartered Institute of Management Accountants® (CIMA)'
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