Make a list of steps of designing an accounting based performance measure. Give an example of decisions taken under each step.

Question

Quizplus · Accepted Answer

The Answer is 1.Choose performance measures that align with top management's goals.
Does operating income, return on assets, or revenues best measure a subunit's financial goals?
2.Choose the Details of Each Performance Measure.
Once a firm has chosen a specific performance measure, it must make a variety of decisions about the precise way in which various components of the measure are to be calculated. For example, if the chosen performance measure is return on assets, should it be calculated for one year or for a multiyear period? Should assets be defined as total assets or net assets (total assets
minus total liabilities)? Should assets be measured at historical cost or current cost?
3.Choose a Target Level of Performance and Feedback Mechanism for Each Performance Measure
For example, should all subunits have identical targets, such as the same required rate of return on assets? Should performance reports be sent to top managers daily, weekly, or monthly?

Make a List of Steps of Designing an Accounting Based