History of Management Accounting (without Fin Acct essay)

History of Management Accounting (without Fin Acct essay) -...

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Unformatted text preview: HISTORY OF MANAGEMENT ACCOUNTING Setting the Stage 1 You’ve probably never heard of E. I. du Pont de Nemours and Company, but you may be familiar with its more common name, DuPont. Some of this company’s best known brands are Teflon® resins, SilverStone® non-stick finish, Lycra® brand spandex fiber, Stainmaster® stain-resistant carpet, Antron® carpet fiber, Dacron® polyester fiber, Kevlar® brand fiber, Corian® solid surface material, Mylar® polyester films, Tyvek® spunbonded olefin fabric, and Coolmax® and Cordura® textile fibers. In 2009, DuPont had revenues of $31.8 billion, net income of $2.0 billion, and ranked number 75 in the Fortune 500 list. DuPont operates in approximately 70 countries worldwide, has more than 75 research and development and customer service labs in 12 countries, and has 60,000 employees worldwide. This is a big company! So what does this company have to do with you (outside of the fact that you probably use many of its products)? In 1903, the owners of DuPont created for themselves a challenge that no one had ever before attempted. And the way they handled this challenge profoundly affected the way America manages its companies today and permanently changed our approach to management accounting. If you want to understand financial accounting in America, you likely need to study the underlying theories of Generally Accepted Accounting Principles (GAAP) and the process used by the Financial Accounting Standards Board (FASB) to create GAAP. But if you want to understand management accounting in America (as well as in many other countries around the world), you really need to put yourself in the shoes of three cousins, Coleman, Alfred, and Pierre du Pont. The DuPont company was established in 1802 near Wilmington, Delaware, by a French immigrant, Eleuthére Irénée du Pont de Nemours, to produce black powder, making it one of the oldest continuously operating industrial enterprises in the world. Essentially, E. I. du Pont built a product that ignited when it was supposed to. This was greatly appreciated by the citizens of the fledgling republic, including Thomas Jefferson, who wrote thanking du Pont for the quality of his powder, which was being used to clear the land at Monticello. Public enthusiasm for du Pont’s product continued and the company grew into a major family corporation. However, the start of the twentieth century brought increased competition from other companies and DuPont fell on hard times. Seizing the opportunity created by the crisis, three great-grandsons of the founder--Thomas Coleman du Pont, Alfred I. du Pont, and Pierre Samuel du Pont--offered to purchase the firm’s assets from the family in exchange for bonds and stock in a new corporation (a transaction known today as a leveraged buy-out). The offer was accepted and in 1902 the company was restructured to look for new business and create new products through research and development....
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History of Management Accounting (without Fin Acct essay) -...

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