Decision making using a combination of management accounting and an expert approach

Abstract

Dmitry V. Isaev - Associate Professor, Department of Business Analytics, National Research University Higher School of Economics
Address: 20, Myasnitskaya Street, Moscow, 101000, Russian Federation
E-mail: disaev@hse.ru

      This paper focuses on the questions of combining management accounting and an expert approach for decision making in the sphere of economics and management. The background of such a combination is that within both approaches there are a decision making goal, a set of alternatives and criteria for their assessment, as well as the possibility of multivariate evaluation of the alternatives for different possible situations.
      The basic decision making processes provide similar data processing. Their scope relies on classification of assessment criteria into three types: quantitative criteria, for which source information for management accounting is available, quantitative criteria with lack of source information for management accounting, and qualitative criteria, for which management accounting methods are not applicable. Relying on such classification, four basic processes are defined: pure management accounting, management accounting supplemented by estimates according to predefined rules, management accounting supplemented by expert estimates, and the pure expert approach.
      Relying on different basic processes, fifteen working processes (including the generalized working process including all four basic processes) are defined. Conclusions are made regarding the practical applicability of different working processes, depending on the scope of decision making criteria.
      Approval of the combined approach is performed with the help of an example of investment appraisal relating to a manufacturing company’s development, using three classic management accounting criteria (payback period, net present value, internal rate of return), and three criteria of a qualitative nature.