Term Paper on "Evaluation of Accounting Questions"

Term Paper 9 pages (2711 words) Sources: 1+

[EXCERPT] . . . .

In addition, there is a prospect that any goodwill that comes about from the business combination might be deemed impaired in the future financial periods, with the corresponding impairment charge causing a further decline in the earnings.

Assignment 3: Focus on Balanced Scorecard

Part a: Discuss at least four dimensions that need balancing

The balanced scorecard is a component for management that enables the successful execution of strategies initiated by the company. By linking the non-financial and operational activities of the firm with central chains to the firm's long-standing approach, the Balanced Scorecard backs the placement and management of all business activities in line with their strategic significance. Initially, the focus was on balancing financial and non-financial measures. The following segment outlines four dimensions that need balancing.

FINANCIAL

BALANCED SCORECARD

LEARNING AND GROWTH

INTERNAL PROCESS

CUSTOMER

i. The financial perspective motivates the consolidation of a few pertinent high-level financial measures. Some of these include operating income, cash flow and return on equity. Specifically, in this perspective, the question being considered is for the company to be financially to be successful, what way should it present itself to the stakeholders? Well-timed and correct financials are a main concern at all times for several organizations. It might also be essential to integrate extra financial associated data, risk assessment, and cost benefit analysis into this financial perspective (Kaplan and Norton, 1993).

ii. The customer perspective takes into consideration the way in which the consumers perceive the company. Some of these measures include the firm's ranking amongst significant consumers, percentage of sales from new products and market share of significant consumer's purchases. With regard to contemporary management viewpoint, there has been an increasing awareness of the importance of placing emphasis on satisfying consumer needs for all business organizations. Therefore, such metrics are justification, in that, if consumers are not sufficiently satisfied with the product and services rendered by a particular organization, they will ultimately shift over or search for another provider (Kaplan and Norton, 1993).

iii. The internal business process perspective takes into consideration the aspects in which the organization ought to excel and succeed. Measures centered on internal business process perspective enable managers to obtain knowledge with respect to how effective their business is functioning, and whether the organization's products and services are in agreement with consumer expectations and requirements. In accordance to Kaplan and Norton (1993), these sorts of measures ought to be prudently considered by those with the paramount knowledge of such practices.

iv. The learning and growth perspective encourages the organization to take into consideration ascertaining the measures that enable the company to improve, develop, create value, and be innovative. Whatever the case may be, growth and innovation encompass of the vital success dynamics for any knowledge-based organization (Kaplan and Norton, 1993). This aspect relays to the enhancements in organizational culture and also growth of the employees through teaching and training. As a result, in a speedily altering technological environment, it is essential for these knowledge-based employees to be incessantly involved in the learning process. Therefore, measures can be introduced so as to direct management in concentrating on capitalizing in teaching and training programs (Kaplan and Norton, 1993).

Part b: Over time, the Balanced Scorecard has developed into four new versions. Describe this development by linking each development version to the model with vertical and horizontal processes

Since its inception, the balanced scorecard has constantly evolved into different versions with each version attempting to resolve the flaws of the preceding one. In particular, this segment described the development of the balanced scorecard into the four different new versions, which include the first generation, second generation, third generation and fourth generation balanced scorecard.

1. First Generation Balanced Scorecard

In the first generation balanced scorecard, the main design encompassed four different perspectives, which included concentrating on the financial measures as well as obtaining measures from other aspects including customers, internal business processes, and learning and growth. The different perspective outlined indicate that Kaplan and Norton (1993) did not consider the necessities of the non-divisional commercial organizations in their original design.

2. Second Generation Balanced Scorecard

In accordance to Kaplan and Norton (1993), with regard to the second generation, the balanced scorecard progressed from an enhanced measurement system to a key and central management system. In particular, this version placed emphasis on the strategic goals and not just the measures. These strategic goals are set against a strategy map for the organization. Strategy maps display in detail how organizations generate value for consumers and stakeholders. Proper and appropriate strategy maps interconnect strategic aims and objective both, internally as well as externally, and are one of the most efficacious and productive communication implements an organization can employ to construct placement, accountably, and a concentration on outcomes (Armitage and Scholey, 2006). With this improved method, the strategic goals are disseminated across the four measurement perspectives, with the main purpose of connecting the dots in order to create a graphical demonstration of policy and measures (Gneen, 2013).

3. Third Generation Balanced Scorecard

The balanced scorecard advanced yet again in the late '90s. This progression considered a number of flaws in the 2nd generation version. For instance, the latter failed to consider the fact that prospects to intercede, to impact strategic goals exist and ought to be affixed in prevailing and real management activity. In addition, the necessity to go ahead and test the influence of these objectives required the formation of an extra design tool referred to as the Vision of the organization. This (Vision of the organization) was a statement detailing the strategic achievement and success of the organization sought. As a result, this made it possible to select targets and measurements and monitor the achievement and success of these objectives. This version advanced the second generation of balanced scorecards to bring about more significance and functionality to strategic goals. The main dissimilarity is the integration of Visions. Other important constituents are strategic objectives, strategic connection model and viewpoints, measures and creativities (Gneen, 2013).

4. Fourth Generation Balanced Scorecard

The prevailing fourth generation evolves from the preceding generations and significantly improves the Balanced Scorecard. Here, the firm reconsiders aspects such as values, governance, and learning and organizational performance culture in the design of their balanced scorecard. In addition, this version's design enables prospects for leadership and management to deliver better outcomes. In the recent times, several tools and constituents for performance management measurement have been developed. However, they are yet to completely become a replacement of the balanced scorecard (Gneen, 2013). In addition, in the contemporary, there is the inclusion of an additional perspective to the BSC (Balanced ScoreCard) by a number of corporations. Including a fifth perspective to the BSC can be deemed to be the best strategy for companies that want to give emphasis to sustainability as a major corporate value or an integral approach. The sustainability perspective encompasses social and environmental performance indicators that connect and work in tandem with the other four BSC perspectives and focus the significance of social, environmental, and economic accountability as a company objective (Butler, Henderson and Raiborn, 2011).

References

Armitage, H. M., & Scholey, C. (2006). Using Strategy Maps to Drive Performance. CMA Canada.

Butler, J. B., Henderson,… READ MORE

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