The Emerging Authority Of Statements On Management Accounting

Abstract

Armco Inc. v. Comr. demonstrated that the accounting profession needs a source of authoritative guidance in management accounting.  Statements on Management Accounting (SMA) offer consensus guidelines and definitions established and approved by a diverse group of accounting professionals and other members of the business community. SMA’s provide a source of guidance that can outweigh other accounting literature that generally represents just one or two authors’, or even an accounting firms’, opinion.  It is imperative for the accounting profession to continue to develop detailed guidance for accounting and reporting practice.  If we don’t, the judicial system may fill this gap.  This article has summarized a recent tax case involving a very specific definition of direct materials.  The future role of the SMA series in similar circumstances is bright, give the need for guidance and the growing awareness of this important professional promulgated.