anna bondareva victor gaag anastasya naskidaeva. content management accounting for international...

Anna Bondareva

Victor GaagAnastasya Naskidaeva

Management Accounting for International companies

Professor Igor N. Baranov 2

Variants of rolling budget (RB)Definitions of RBWhy do managers need RB?RB vs. Traditional budget (“+” and “-”)Guidelines for successful implementation of

RBConclusion

Variants of budgetingRolling budget

Revised while with

permanent being implemented horizon of

planning

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Professor Igor N. Baranov

Variants of budgeting



Rolling (continuous) budget:

A budget continuously updated by adding a further accounting period (month or quarter) when the earliest accounting period has expired. Its use is particularly beneficial where future costs and/or activities can not be forecast accurately

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Why do managers need RB?

ControlRevision Reassessment of competitive factorsForecast

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Better financialresults



RB vs. Traditional (Advantages of RB)

Encourage managers to assess, think strategically year-round rather than just once a year at budget time

Managers have a full year’s budget always available and the rolling budget forces them to continue plan ahead

“A static budget simply doesn’t reflect the pace of business today,” says Jill Langerman, CPA, president and CFO of the accounting firm Fair, Anderson & Langerman in Las Vegas

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RB vs. Traditional (Disadvantages of RB)Takes too much time & effort Can create uncertainty for managers as the

budget is constantly being changed

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Why do companies failure while implementing RB?

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They use RB





Practical Example #1Volvo relies on several types of rolling forecasts:every month a «flash» forecast that looks 3 months

ahead: informs managers about current demandevery quarter - a 12-month forecast: updates managers’

assumptions about customer behavior & economic trendsevery year - 2 additional forecasts

1) looking 4 years ahead

2) looking 10 years ahead

access the company’s market positioning & determine schedules for phasing out old models & phasing in new ones.



Practical Example #2Cicso- a producer of ¾ of the world’s computer

networking equipmenta hybrid of traditional & rolling budgetsan annual plan which remains fixed for a yearBut each quarter it is reviewed against actual

performance & adjusted for the remainder of the year.

Besides they produce rolling 12-month financial forecasts on a monthly basis, incorporating numerous «what-if» scenarious into its calculations.

Guidelines for successful implementation of RB:

1. Firstly, a firm needs to ensure that the overall volume of information required is reasonable. Too many details can lead to misunderstanding and moving into wrong direction

2. Secondly, senior managers as well as line managers need to be actively involved

3. Thirdly, re-forecasts and re-budgets must be based on a thorough analysis of the changes in operating variables and marketplace

4. Fourthly, adoption of RB must not reinforce the concentration on financial measures and result in the exclusion of other critical operating measures

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The concept of rolling budget states that budgeting is a continuous process,

but not something that takes place once a year than a budget is drawn up

Therefore sound managers are encouraged to constantly look ahead revising and reassessing a company’s future projections several times a year.

“A static budget simply doesn’t reflect the pace of business today,” says Jill Langerman, CPA, president and CFO of the accounting firm Fair, Anderson & Langerman in Las Vegas.

Conclusion

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anna bondareva victor gaag anastasya naskidaeva. content management accounting for international...

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content management accounting

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companies failure

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