NEW VALENCES OF USING THE CONCEPTS OF MANAGERIAL ACCOUNTING IN THE BANKING INDUSTRY
NEW VALENCES OF USING THE CONCEPTS OF MANAGERIAL ACCOUNTING IN THE BANKING INDUSTRY

Summary/Abstract: Various industries use Managerial accounting as an applied discipline. Its specific functions and concepts can be used with the same results whether the industry is manufacturing based or services orientated. The changes in accounting standards and compliance, along with greater emphasis on managing risk and value, have introduced new key measures of bank performance and made it more important to coordinate the internal and external reporting of financials and risk. To meet these challenges, banks must more fully integrate their accounting data and processes. Viewing managerial accounting from the perspective of the banking industry provides a unique opportunity to explore the development of the internal reporting structure. While the use of internal cost and profitability reports is widespread in merchandising, manufacturing, and other service industries, banks have historically focused only on overall profitability. An important concept used in manufacturing but is also applied in banking is transfer pricing. It is a fundamental principle used in assigning value and revenue attribution to the various business units. Essentially, transfer pricing in banking is the method of assigning the interest rate risk of the bank to the various funding sources and uses of the enterprise. Once transfer pricing is applied and any other management accounting entries or adjustments are posted to the ledger the business units are able to produce segment financial results which are used by both internal and external users to evaluate performance.

• Details
• Contents