Management Accounting Guidelines

(Editor's note: Kevin Moss, the immediate past president of the Farm Financial Standards Council, wrote this supplement to National Hog Farmer's Production & Financial Standards, Platinum edition, April 15, 2001.)

The Farm Financial Standards Council (FFSC) is best known as the organization that developed the Guidelines for Agricultural Producers (Guidelines), originally issued in 1991 and updated several times since.

Within the last year the FFSC has started to develop a set of management accounting guidelines as a supplement to the original Guidelines. This effort has broad industry appeal with funding support for the project provided by the National Corn Growers Association (NCGA), National Pork Producers Council (NPPC), National Cattlemen’s Beef Association (NCBA) and the United Soybean Board (USB).

The FFSC is a volunteer organization with a 40-member board of directors composed of agricultural producers, commodity group staff members, accounting professionals, lenders, agricultural supply companies, ag service companies, and university/Extension staff members.

The FFSC mission statement reads: To provide education and a national forum to facilitate the development, review, communication, and promotion of uniformity and integrity in both financial reporting and the analytic techniques useful for effective and realistic measurement of the financial position and the financial performance of agricultural producers.

The FFSC Technical Symposium in August 1995 focused on the integration of production and financial standards. Jim McGrann acquainted us with the NCBA Standardized Performance Analysis (SPA) initiative. Earl Dotson acquainted us with the NPPC effort to pursue development of production and financial standards. During the past few years the corn/soybean production and financial standards initiative has been progressing under the leadership of Paul Havick and the Iowa Soybean Association.

The focus of the FFSC historically has been on whole entity reporting and analysis. Initially we were concerned that as one commodity group developed a standard chart of accounts for their business it might not fit with other commodity businesses. These producer led initiatives to examine and restructure how we accumulate and use knowledge in our agricultural businesses. These efforts are creating challenges and opportunities for all of us involved in agriculture.

The key issue for the FFSC was how to broaden the Guidelines to more effectively cover internal management information needs to make them capable of supporting producer-led initiatives. This effort supports the more sophisticated and comprehensive management information system to which producers are turning.

The FFSC management accounting guidelines project has two primary objectives:

1. Develop a set of management accounting guidelines that will become part of the Financial Guidelines for Agricultural Producers (Guidelines). As more and more organizations move to address additional analysis and reporting issues beyond whole entity reporting, and as this framework is being provided to agricultural producers in addition to the traditional enterprise and management analysis utilized by agricultural universities, farm recordkeeping services, and other agricultural groups, there is becoming an increasing diversity (and potential inconsistency) in what is being described to agricultural producers as approaches to "management accounting" and internal analysis.
   
   

   The Management Accounting Guidelines will also include a basic chart of accounts (to facilitate the organization of financial data elements) and a definition of core integrated financial and production measures.

2. 2. Develop a standards compatibility review process that can be accessed and utilized by interested commodity groups as part of their own standards development and quality control processes.

The management accounting guidelines project is well under way. A management accounting committee met with representatives from the commodity groups earlier this year. The next meeting is in Kansas City on May 17-18 and, tentatively, July 19. The Annual Technical Symposium is scheduled for August 17-18 in Bloomington, IL.

More information about activities of the FFSC, including the management accounting project, can be found on our Web site at www.ffsc.org. If you would like additional information, please e-mail Kevin Moss, immediate past president, at kmoss@agribank.com, Kendal Thompson, president, at kenjthom@netins.net or Steve Hofing, chairman of the technical committee, at slh@centrec.com.