The Importance Of Managerial Accounting In Cheung Kong Group

The way to develop a successful Business

Li Ka Shing, Asia's most successful entrepreneur, Cheung Kong (Holdings) Limited is the “Star” of the Cheung Kong Group, the leading Hong Kong based multi-national conglomerate. Since 1972 Cheung Kong Holdings has been listed on the Hong Kong Stock Exchange. It is a property development and strategic investment company, with substantial interests in life sciences and other businesses. It is one of the largest developers in Hong Kong with a long history of property development expertise. Almost 20% of the private residences in Hong Kong were developed by them. They are also one of the leaders in marketing and after-sales services.

Managerial accounting is very sympathetic with providing data to managers, people who worked inside of the organization who were direct and control its operation. In contrast, financial accounting is anxious with providing information to stockholders, creditors, and others who are outside an organization.

Managerial accounting provides the essential data with which the organizations are actually run. Managerial accounting is also named as cost accounting. The Managerial accountants prepare the wide range of reports. Some reports focus on how well managers or business units have performed-comparing actual results to plans and to benchmarks. Some reports provide timely, frequent updates on key indicators such as orders received, order backlog, capacity utilization, and sales. Other analytical reports are prepared as needed to investigate specific problems such as a decline in the profitability of a product line. And yet other reports analyze a developing business situation or opportunity.

Due to planning is such an important part of the manager's job, managerial accounting has a strong future heading. To compare with, financial accounting primarily provides summaries of past financial transactions. These summaries may be useful in planning, but only to a point but the future is not simply a reflection of what has happened in the past. Changes are constantly taking place in economic conditions as we all know. Therefore, all of these changes require the manager's planning be based in large part on calculate on what will happen rather than on summaries of what has already happened. Because of managerial accounting is completely optional, the important question is always, “Is the data useful?” rather than, “Is the information required?” Therefore, managerial accounting plays a big part in - the way to develop a successful Business

Background

Mr. Li Ka-shing is the Chairman of Cheung Kong (Holdings) Limited and Hutchison Whampoa Limited. Cheung Kong (Holdings) Limited is the “Star” of the Cheung Kong Group which has business activity in 54 countries around the world and employs about 240,000 staff. In Hong Kong alone, the Group includes nine listed companies with a combined market capitalization of nearly HK$630 billion (30 November, 2009).

Cheung Kong (Holdings) Limited (“Cheung Kong Holdings”) is the flagship of the Cheung Kong Group, the leading Hong Kong based multi-national conglomerate. In Hong Kong alone, the Group has nine companies.

  • Cheung Kong (Holdings) Limited, a constituent member of the Hang Seng Index.
  • Hutchison Whampoa Limited
  • Cheung Kong Infrastructure Holdings Limited
  • Hongkong Electric Holdings Limited
  • Hutchison Telecommunications International Limited.
  • Hutchison Harbour Ring Limited SEHK:
  • TOM Group Limited.
  • CK Life Sciences Int'l., (Holdings) Inc.
  • TOM Online Inc.

Managerial accounting has beginning in the 19th century, about the time of the industrial revolution. During that early period, most firms were strongly controlled by several owner-managers who based on personal relationships and their personal assets. Managerial accounting was rather like a veteran and provided the essential information needed to manage the early large scale production of textile, steel, and other products. At the late 19th century, management accountants increasing their focus about the efforts on guarantee that financial accounting requirements were met and financial reports were released on time. Then, the practice of management accounting stagnated. In the early part of the 20th century, as product line expanded operations became more mixed, forward looking companies saw a renewed need for management-oriented reports that was needed to separate from financial reports. But in most companies, management accounting practices up through the mid-1980s were bulky indistinguishable from practices that were common prior to World War I. In recent years, however, new economic forces have led to many important innovations in management accounting.

Practitioners of managerial accounting and financial management have a responsibility to the public, their metier, the institutions they serve, and themselves, to maintain the highest standards of ethical conduct. In perception of this responsibility, the organization of the accountants has trumpeted the following standards of ethical conduct for practitioners of managerial accounting. Steady attached to these standards internationally is entire to accomplishing the target.

Content

Cheung Kong Holdings is a property development and strategic investment company. C K Holdings is the largest shareholder of Hutchison Whampoa Limited holding a 49.97% interest. In year 2000, Cheung Kong Holdings began its biotechnology operations. Cheung Kong Life Sciences Int'l., (Holdings) Inc.

Li Ka Shing, Asia's most successful entrepreneur; the Chairman of Cheung Kong Holdings - as the practitioner, managerial accounting plays an important role in it and have responsibility to maintain an appropriate level of professional competence by ongoing development of their knowledge and skills. Perform their professional duties in accordance with relevant laws, regulations and technical standards as well as prepared complete and clear reports and recommendations after appropriate analysis of relevant and reliable information.

Refrain from disclosing confidential information acquired in the course of their work except when authorized, unless legally obligated to do so. To inform subordinates as appropriate regarding the confidentiality of information acquired in the course of their work and monitoring their activities to assure the maintenanceof that confidentiality. And need to avoid from using or appearing to use confidential information acquired in the course of their work for unethical or illegal advantage either personally or through third parties.

In applying the standards of ethical conduct, practitioners of management accounting and financial management may encounter problems in identifying unethical behavior or in resolving an ethical conflict. When faced with significant ethical issues practitioners of management accounting and financial management should follow the established policies of the organization bearing on the resolution of such conflict. If these policies do not resolve the ethical conflict, such practitioner should consider the following course of action.

Discuss such problems with immediate superior except when it appears that superior is involved, in which case the problem should be presented to the next higher managerial level. If a satisfactory resolution cannot be achieved when the problem is initially presented, submit the issue to the next higher managerial level. If the immediate superior is the chief executive officer or equivalent, the acceptable reviewing authority may be a group such as the audit committee, executive committee, board of directors, board of trustees, or owners. Contact with a level above the immediate superior should be initiated only with the superior's knowledge. Assuming the superior is not involved. Except where legally prescribed, communication of such problems to authorities or individuals not employed or engaged by the organization is not considered appropriate.

Clarify relevant ethical issues by confidential discussion with an objective adviser to obtain a better understanding of possible course of action

Consult your own attorney as to legal obligations and rights concerning the ethical conflict. If the ethical conflict still exists after exhausting all levels of internal review, there may be no other recourse on significant matters than to resign from the organization and to submit an informative memorandum to an appropriate representative of the organization. After resignation, depending on the nature of the ethical conflict, it may also be appropriate to notify other parties.

Conclusion

Assuming management accounting systems are important in the growing companies. The choose of operating budgets moreover is faster when associated with faster growing companies, and the findings of additional management accounting systems including: cash budgets, variance analysis, operating expense approval policies, capital expenditure approval policies, product profitability, customer profitability, and customer acquisition costs. The influence of industry choice, for example: biotechnology, information technology, or non-tech, etc. It is examined in each stage of the research. Here I use Cheung Kong Group for investigate into management accounting system choices and their association with performance. Consistent with management accounting, it can mitigate agency costs; we find that the presence of external investors - venture capitalists - is associated with faster adoption of operating budgets. The presence of budgets may help directors in their monitoring role as well as the CEO's ability to delegate decision-making. The size of the company - as peroxide by number of employees - is related to faster adoption. Company complexity increases the demand for management accounting systems both in terms of agency relationships and information needs. The results are consistent with budgets assisting in the management of this complexity. We also find that the perceived benefits and costs— peroxide by CEO experience—and company culture are also associated with faster adoption. The hiring of a financial manager is also associated with this adoption decision. This is consistent with “import-in” notion of management accounting system evolution where firms acquire new systems with newly appointed managers as a “bundled pair.” However, when this hiring decision is modeled as endogenous, we find that companies with venture capital funding, CEOs with more years of work experience, a culture that values planning, and larger companies are more likely to hire this bundled “new manager/new accounting system” pairing sooner.

Finally, the paper documents an association between the adoption of operating budgets and company performance. We find a significant increase in the growth of the company in the window around the adoption year. Furthermore, companies' adoption of operating budgets is associated with their future growth.

The existing literature suggests management accounting systems play two main roles - reducing agency costs, and facilitating decision-making. First, they reduce the agency costs associated with the separation of ownership and control. One approach to examine their relevance is to focus on the contracting process between principal and agent. Previous research in larger companies has examined the role of accounting information in the contracting process with managers.

Conclusion

Mr. Li Ka Shing founded Cheung Kong Industries in 1950s as a plastics manufacturer. Under his leadership, the company grew rapidly and eventually evolved into a property investment company. “Cheung Kong (Holdings) Limited” was developed in a successful way from 1970s. Cheung Kong Holdings is one of the largest developers of residential, office, retail, industrial and hotel properties in Hong Kong. With its long history of property development expertise and residential estates, Cheung Kong Holdings has built many of Hong Kong's most notable landmark buildings and complexes.

Management accounting systems are an important aspect of startup company evolution. This paper makes several contributions to our understanding of management accounting adoption. First, we document the positive association between the adoptions of operating budgets—a pivotal management accounting system—and company growth. Not only is the growth of companies in the window around the adoption year significantly larger than outside this window, but also the portfolio of operating budget adopters grows significantly faster than the portfolio of non-adopters. This evidence is consistent with the belief that appropriate management accounting systems are relevant to facilitate growth. As noted before, our research does not address the causality issue of whether early system adoption provides a platform for future growth or whether managers who anticipate future growth earlier choose to adopt management accounting systems earlier.

Second, we document variables associated with the adoption of management accounting systems. The hiring of a financial manager is highly significant. Management accounting know-how appears to be costly enough to “import-in” a specialist who comes with financial systems' skills. Venture-backed companies, CEO experience, and a company culture that values planning hire the financial manager faster. The relevance of venture capital to this event suggests that management accounting information has a significant role in the monitoring of company activities to decrease agency costs. The relevance of CEO experience speaks to their benefits as decision-making tools. More experienced managers seem to perceive that the benefits of hiring a person with management accounting systems' knowledge outweigh the costs sooner than less experienced managers. A company culture also affects management accounting choices. Companies that value planning are significantly faster in hiring a financial manager.

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