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Contemporary developments in measuring financial performance are integrated with conventional responsibility accounting performance reports. Real-time reporting, the impact of shared services and team-based structures are now included. The transfer pricing section has been reformulated to provide a clearer demonstration of the operation of such systems. | Chapter 12 Financial performance reports and transfer pricing Decentralisation Benefits Managers of sub-units have better local information about markets and operations to enable them to manage their areas more effectively Provides managerial training for future higher-level managers May lead to greater motivation and job satisfaction for sub-unit managers Allows corporate managers more time for strategic issues Allows the organisation to react more quickly to opportunities and problems as they arise Decentralisation and Responsibility accounting Decentralisation The restructuring of the organisation into smaller sub-units, such as divisions and departments, each with specific operations and decision-making responsibilities Responsibility accounting Assign responsibility to managers to run particular sub-units of the organisation Helps to reinforce the advantages of decentralisation Decentralisation Negative consequences Managers may focus too narrowly on their own sub-unit . | Chapter 12 Financial performance reports and transfer pricing Decentralisation Benefits Managers of sub-units have better local information about markets and operations to enable them to manage their areas more effectively Provides managerial training for future higher-level managers May lead to greater motivation and job satisfaction for sub-unit managers Allows corporate managers more time for strategic issues Allows the organisation to react more quickly to opportunities and problems as they arise Decentralisation and Responsibility accounting Decentralisation The restructuring of the organisation into smaller sub-units, such as divisions and departments, each with specific operations and decision-making responsibilities Responsibility accounting Assign responsibility to managers to run particular sub-units of the organisation Helps to reinforce the advantages of decentralisation Decentralisation Negative consequences Managers may focus too narrowly on their own sub-unit performance rather than on attaining the organisation's overall goals Some tasks and services may be duplicated unnecessarily Goal congruence: a behavioural challenge Goal congruence may be difficult to achieve in a decentralised organisation Performance measures and reward systems may provide direction and incentives to achieve wider organisational goals Responsibility centres A responsibility centres is a sub-unit of an organisation where the manager is held accountable for the sub-unit’s activities and performance Investment centre Profit centre Cost centre Revenue centre Responsibility centres Terminology in practice Cost centre is commonly used Revenue centre seldom used Profit centre may refer to both profit centres and investment centres Strategic business unit (SBU) often used to refer to investment centres and sometimes profit centres where they have their own distinct markets and strategies New developments in organisational structuring Shared services The .
