Accounting and finance: managing risks and costs

Article Abstract:

The management of risk in the appraisal of capital investments and the use of Activity Based Costing (ABC) are reviewed based on a number of papers on these issues. Risk management that places emphasis on the overall risk of the project rather than on the risk of the portfolio, and managerial judgement based on intuition and experience is used by a number of firms. This judgement is used as the basis for the development of flexibility options and incremental options. As a form of cost accounting, ABC has shown frequent use in the costing of products. The logic of this popular costing method, however, is disputed in one of the papers reviewed.

Methods, Management, Risk management, Valuation

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Tax legislation and capital budgeting

Article Abstract:

The incorporation of tax legislation into a before tax capital project evaluation enhances the quality of the analysis results. With reference to payback period and internal rate of return, simple examples, based upon the U.K. but applicable to other countries, demonstrate the effect of tax legislation on capital expenditure evaluations in terms of the size and timing of cash flows. Non-specialists should appreciate the basic principles regarding the impact of tax legislation.

Finance, taxation, & monetary policy, Interpretation and construction, Taxation, Tax law, Corporate taxes, Corporations, Cash flow, Capital budgets, Great Britain

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How managers think about costs

Article Abstract:

An update of research into several key issues in management accounting is provided. The update covers subjects such as the influence of cognitive style on the perception of opportunity costs in resource allocation decisions, the latest trends in transnational accounting and financial reporting, the interpretation of the principles of truthfulness and fairness in financial statements, and the use shareholder value analysis.

Economic aspects, Resource allocation, Managerial accounting

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