Applications And Practices Of Management Accounting In The Hospitality And Tourism Industry

Intercontinental Hotel Group

Questions:

1. Discuss the important issues in determining the financial and management reporting requirements.

2. Assess who are the important groups to liaise with if there are any reporting issues.

3. Evaluate how you would plan to ensure that deadlines are met and all reporting issues are resolved.
 

This report encompasses with the applications and practices of the management accounting in the hospitality and tourism industry. In the recent years, the world has experienced a rapid growth in this industry which leads to the consequences of complex transformation from the global competition in the market through the evolution of the technological advances. Therefore, the organizations are compelling themselves to redefine their business foundations and seek solution to survive and prosper in the long run. However, Management Accounting has evolved in this response to the productive changes and considering the new horizons for the organizational environment. This influences the strategy for developing the accounting system adopted by the firm (Urquidi, 2013).

Intercontinental Hotel Group is one of the most recognized multinational hotel companies in the world, founded in 2003. It owns seven brands in the hotel industry providing the facilities of high class aimed at serving the leisure traveler and discerning business. Its headquarter is located in Denham, United Kingdom. The company generates more than 80% of profit from the predominant franchised and managed hotels.  The company has developed its strategy to take the advantage of the increasing popularity across the new market and low cost airlines. It has done substantial investment to develop its brand with the successful refinancing strategy (ihgplc, 2016) 

Intercontinental group of hotels has set their reporting standards according to Australian Accounting Board (AASB). The laws institutionalized by the organization are based on the Corporations Law Entities mentioned under the section 296 of Corporations Act 2001. These laws and standards comprises of general purpose financial reports issued by the reporting entities of private sector. This organization has taken the measured approach for making evaluation of the financial and prudential implications of IFRS. It is necessary for every organization to comply with the financial reporting standards (Perera & Chand, 2015).

The main role of the organization behind the compliance of the financial reporting standards is:

• To develop a conceptual framework for the purpose of evaluation of the proposed standards.
• Formulation of the accounting standards for the other purposes.
• To participate and make contribution in the development of the single set of accounting standards for making it worldwide use.
• To advance and promote the main object of the Part 12 of the ASIC Act that includes reduction of cost of capital, enabling the entities to complete effectively the confidence of overseas and local investors in the economy (Ball, 2006).

While making determination of the financial and reporting requirements, the reporting team has monitored a wide variety of issues just because of the attraction created by the global organizations in the market. Implementation of the financial reporting standard is a challenge for the non-public accountable entities (Schipper, 2003).

As per the Securities and Exchange Commission (SEC), the International Reporting Standards (IFRS) is circulated by the requirements of removing the reconciliation for the foreign private issuers. For the Intercontinental Group of Hotels, preparation of the financial statements is always a demanding responsibility for the group requiring for the input of the highly trained professionals. The financial reporting standards are the result of the efforts of the standard setters. They provide information related to the financial statements while making balance of the costs and the required budget. With the growing complexities of the Hospitality and tourism industry and their transactions, the demands of the public scrutiny and regulatory bodies has added value to the reporting standards(Gebhardt, 2006).

Financial reporting standards

The following are the complexities that are faced by the organization while making determination of the reporting and management requirements:

• Increase in Complex Business Operations: Sometimes, businesses use structures, financial instruments and structures that are very complex for the management of exposures and the operations of the business. The apportionment of the risks and rewards were not recorded in the past decades. It increases the complexities of the reporting requirements mainly in the case of rapid changes which increases the difficulties in domestic and international reporting requirements.
• Complexities of the regulatory framework: The current regulatory system of the nation is not optimal. It requires the General Purpose Financial Reporting Standards for entities that confuses the companies for the special purpose needs. It was found that 41 percent of the businesses are nominated for the ‘changes in rules and regulations’ as the biggest driver for rising business complexities from the last two years. Additionally, the task force has determined that there are some aspects of accounting standards that has increased the complexities such as:
• The current body of financial reporting requirements has required for the mix of principles and rules that are complicated and promoted the professional requirements.
• The current accounting framework is using the hybrid measurement frameworks such as mixture of cost value and fair value.
• The situation where there is impact of the fair value reported through profits shows concerns for the volatility and obscuring of trends.
• The requirements of the IFRS are applied in a very exceptional case.
• There are significant differences in the valuation placed on the similar basis, when assets and liabilities are not identical.
• Changing attitudes of the Stakeholders and Businesses: This creates an aversion to the risk created by the companies, auditors, directors and preparers in litigious to more responsive environments. This gives birth to the behavior of key parties, particularly auditors and prepares of “when in doubt, disclose’.
• Development of the Integrated Reporting: Such interest are brought by the current workforce for the development of integrated reporting and welcomes the interests of the companies and shareholders for making improvement in the communication. The requirement of companies is very less at the early stages(Ball, Infrastructure Requirements fInfrastructure Requirements for an Economically Efficient System of Public Financial Reporting and Disclosure, 2001). 

The company predominantly manages and franchises its hotels with the enabling strategy to grow its business, generating high returns on the capital invested by the firm. They operate its business on behalf of the owners of the third party hotels. To drive the expansion and growth in the business, Intercontinental Hotel Group makes its presence in the priority market. The company consists of the key persons identifying and managing the related issues with the accounting. In order to overcome with the strategic business issues, the company established the integral part of the business vision stronger, offering the most consistent experience to the owners and customers of the company.

Intercontinental Hotel Group manages more than 650 hotels across the world having control over its activities. To implement its strategy, it is closely related with the owners of the hotel shape the hotel to with the support of the management tool. The company’s owners and holders of the franchisee reports in the hotel on the issues related to the community and environmental activities. However the company provides training for the hospitality jobs in their local communities. It also communicates with the employees about the business information and their performance to solve the issues valuing the company’s prominent feature in the global management process (Dumitru, Calu, Gorgan, & & Adriana, 2011)

The company formally reports to the shareholders twice in a year and holds regular meetings with the major institutional shareholders to discuss about the company’s performance, plans progress and its objectives. If there is rise in the reporting issues, the company report to its shareholders and suppliers. The company engages with its stakeholders to gain the related insight on its key issues relevant to the prior assessment areas determined by the business. It continues to develop the feedback from its stakeholders to strengthen its activities and the engagement programme (Ihgplc, 2011)

To develop the strategy, the organization need to have the information on the activities and the services it performs to develop the plans with the view to keep the financial data in costing and budgeting the related services. The management accounting techniques aims to determine the structure of the company and its revenue according to the principle of managerial costing. It results into many differences with the application of the accounting methods and techniques. These issues are needed to be considered with the related managerial person to evaluate the company’s performance and making the decisions according to the framework of the company. However, it is essential for the company to have good relations with their stakeholders so that the issues can be resolved easily and efficiently. Through this analysis, the identification and assess of the influencing issues can be significantly address with the presence of the important key people of the company. It develops its services according to the need and requirement of the customers in the organization with the less arising issues. Therefore, to expand the reach of Intercontinental Hotel Group, the company develops the strategies identifying the needs of the customer and managing its managerial accounting to lead in the industry and achieve greater success across the globe (Sunarni, 2013)

Reporting and management requirements

Most of the organization embraces its sustainability in its reporting issues and managing the system processed by the management. Most of the department tend to posses and improve the reporting process in order to ensure that deadlines are easily met and all the issues are resolved on the priority basis. The business leaders are playing a major role in supporting the operational decision making. The company is pressurized to provide the accurate and reliable managerial information efficiently on time to meet the standards. To address these internal and external reporting issues the company seeks the effective ways in optimizing the efforts of the business activities. There are various significant opportunities for ensuring the deadlines of the report, make better financial decisions, and improving the transparency to the key holders of the company. Through the consideration of the factors available across the business dimension, highly sustainable structure and strategy of the business can be developed. However, through proper planning all the reporting issues can be easily resolved and met with the deadline (Bonner, Hastie, Sprinkle, & Young, 2000)

The company should determine the desired results and monitor the progress of the business by developing the effective plan. The reporting objectives of the overall strategy of the organization should be aligned properly and drives a close check on its key performance. Intercontinental Hotel Group should also consider the opportunities throughout the reporting cycle. The changes should be implemented according to the desired accounting standards. The finance and management accounting function should be properly aligned to enable the strategy of the organization. The alternative operating models of the management accounting must be evaluated to focus on the degree of centralization of the overall function of the finance in the reporting issue. The roles and responsibilities should be clearly assigned to the management. It helps in the contribution of the goals and objectives of the company. This helps in managing the accounting issues proactively and performs the accounting analysis properly (pwc, 2007) 

Conclusion

Management accounting plays a very important role in the improvement and success of the business. The accounting investigates the manager’s exercise in the discretion and reporting issues. The company defined their business policies in such a manner that it survives and prospers for the long period of time. However, Management Accounting has evolved in this response to the productive changes and considering the new horizons for the organizational environment. Intercontinental group of hotels has set their reporting standards according to the laws institutionalized by the country and are based on the Corporations Law Entities. The company has developed the management approach for making evaluation of the financial and prudential implications of IFRS (Stede, 2016). Therefore, the company should implement the alternatives for analyzing the financial statements in more detailed manner and the management accounting needs to be considered with the exercise of the accounting discretion.  

References

Ball, R. (2001). Infrastructure Requirements fInfrastructure Requirements for an Economically Efficient System of Public Financial Reporting and Disclosure. Brookings-Wharton Papers on Financial Services , 127-169.

Ball, R. (2006). International Financial Reporting Standards (IFRS): pros and cons for investors. Accounting and Business Research.

Bonner, S. E., Hastie, R., Sprinkle, G. B., & Young, S. M. (2000). A Review of the Effects of Financial Incentives on Performance in Laboratory Tasks: Implications for Management Accounting. Journal of Management Accounting Research, 12(1), 19-64.

Dumitru, M., Calu, D. A., & Gorgan, C. (2011). A Historical Approach Of Change In Management Accounting Topics Published In Romania. Accounting and Management Information Systems, 10(3), 375- 396.

Gebhardt, H. D. (2006). International financial reporting standards and experts’ perceptions of disclosure quality. A journal of Accounting, Finance and Business Studies, 461-498.