Business and Quality Improvement Programs:

The last two decades have been a period of tremendous upheaval and change in the business environment, including the explosive growth of the internet.
Competition in many industries has become world wide in scope, and the space of innovation in products and services has accelerated. This has been good news for consumers, since intensified competition has generally led to lower prices, higher quality and more choices.
However, the last two decades have been a period of wrenching change for many businesses and their employees. Many managers have learned that cherished ways of doing business don't work any more and that major changes must be made in how organizations are managed and in how work gets done. These changes are so great that some observers view them as a second industrial revolution. This revolution is having a profound effect on the practice of managerial accounting-as we will see through the rest of the text. First, however. it is necessary to have an appreciation of the ways in which organizations are transforming themselves to become more competitive. Since the early 1980s, many companies have gone through several waves of Business and Quality improvement programs, starting with Just-In-Time (JIT) and passing onto Total Quality Management (TQM), Process reengineering, and various other management programs-including in some companies The Theory of Constrains (COT), When properly implemented, these improvement programs can enhance quality, reduce cost, increase output, eliminate delays in responding to customers, and ultimately increase profits. They have not, however, always been wisely implemented, and there is considerable controversy concerning the ultimate value of each of these programs. Nevertheless, the current business environment cannot be properly understood without some appreciation of what each of these approaches attempts to accomplish. Each is worthy of extended study, but we will discuss them only in the broadest terms the details are best handled in operations management courses.

1. Just in time (JIT) manufacturing system
2. KANBAN
3. Total quality management (TQM) system
4. Six sigma
5. Business process reengineering (BPR)
6. Theory of constraints (TOC)

1.         Just-in-Time (JIT) Manufacturing and Inventory Control System:
Just In Time (JIT) is a production and inventory control system in which materials are purchased and units are produced only as needed to meet actual customer demand. Under ideal conditions a company operating at just in time manufacturing system would purchase only enough materials each day to meet that days needs. Moreover, the company would have no goods still in process at the end of the day, and all goods completed during the day would have been shipped immediately to customers. 
2.          Kanban:
A Kanban system is a means to achieve just in time (JIT) production. It works on the basis that each process on a production line pulls just the number and type of components the process requires, at just the right time. The mechanism used is a Kanban card. This is usually a physical card but other devices can be used Two types of such cards are usually used.
3.        Total Quality Management (TQM) System:
Total quality management (TQM) is an improvement program which provides tools and techniques for continuous improvement based on facts and analysis; and if properly implemented, it avoids counterproductive organizational infighting.
4.       Six Sigma:
Six sigma is a quality standard that establishes a goal of no more than 3.4 defects per million units or procedures. What does the name mean? 
5.          Business Process Reengineering (BPR):
A business process is any series of steps that are followed to carry out some task in a business. Process reengineering focuses on simplification and elimination of wasted efforts. A central idea of process reengineering is that all activities that do not add value to a product or service should be eliminated.
6.          Theory of Constraints (TOC):
Theory of constraints (TOC) is a management approach that emphasizes the importance of managing constraints. A constraint or bottleneck is any thing that prevents you from getting more of what you want. Study of constraints or bottlenecks, keeping their record and taking necessary steps to improve them is also known as bottleneck accounting.
 

Financial Accounting Vs Managerial Accounting - Difference between financial and Managerial Accounting:

Financial accounting reports are prepared for the use of external parties such as shareholders and creditors, whereas managerial accounting reports are prepared for managers inside the organization. 
This contrast in basic orientation results in a number of major differences between financial and managerial accounting, even though both financial and managerial accounting often rely on the same underlying financial data. In addition to the to the differences in who the reports are prepared for, financial and managerial accounting also differ in their emphasis between the past and the future, in the type of data provided to users, and in several other ways. These differences are discussed in the following paragraphs.

Emphasis on the Future:

Since planning is such an important part of the manager's job, managerial accounting has a strong future orientation. In contrast, financial accounting primarily provides summaries of past financial transactions. These summaries may be useful in planning, but only to a point. The future is not simply a reflection of what has happened in the past. Changes are constantly taking place in economic conditions, and so on. All of these changes demand that the manager's planning be based in large part on estimates of what will happen rather than on summaries of what has already happened.

Relevance of  Data:

Financial accounting data are expected to be objective and verifiable. However, for internal use the manager wants information that is relevant even if it is not completely objective or verifiable. By relevant, we mean appropriate for the problem at hand. For example, it is difficult to verify estimated sales volumes for a proposed new store at good Vibrations, Inc., but this is exactly the type of information that is most useful to managers in their decision making. The managerial accounting information system should be flexible enough to provide whatever data are relevant for a particular decision.

Less Emphasis on Precision:

Timeliness is often more important than precision to managers. If a decision must be made, a manager would rather have a good estimate now than wait a week for a more precise  answer. A decision involving tens of millions of dollars does not have to be based on estimates that are precise down to the penny, or even to the dollar. In fact, one authoritative source recommends that, "as a general rule, no one needs more than three significant digits., this means, for example, that if a company's sales are in the hundreds of millions of dollars, than nothing on an income statement needs to be more accurate than the nearest million dollars. Estimates that accurate to the nearest million dollars may be precise enough to make a good decision. Since precision is costly in terms of both time and resources, managerial accounting places less emphasis on precision than does financial accounting. In addition, managerial accounting places considerable weight on non monitory data, for example, information about customer satisfaction is tremendous importance even though it would be difficult to express such data in monitory form.

Segments of an Organization:

Financial accounting is primarily concerned with reporting for the company as a whole. By contrast, managerial accounting forces much more on the parts, or segments, of a company. These segments may be product lines, sales territories divisions, departments, or any other categorizations of the company's activities that management finds useful. Financial accounting does require breakdowns of revenues and cost by major segments in external reports, but this is secondary emphasis. In managerial accounting segment reporting is the primary emphasis.

Generally Accepted Accounting Principles (GAAP):

Financial accounting statements prepared for external users must be prepared in accordance with generally accepted accounting principles (GAAP). External users must have some assurance that the reports have been prepared in accordance with some common set of ground rules. These common ground rules enhance comparability and help reduce fraud and misrepresentations, but they do not necessarily lead to the type of reports that would be most useful in internal decision making. For example, GAAP requires that land be stated at its historical cost on financial reports. However if, management is considering moving a store to a new location and then selling the land the store currently sits on, management would like to know the current market value of the land, a vital piece of information that is ignored under generally accepted accounting principles (GAAP).

Managerial AccountingNot Mandatory:

Financial accounting is mandatory; that is, it must be done. Various out side parties such as Securities and exchange commission (SEC) and the tax authorities require periodic financial statements. Managerial accounting, on the other hand, is not mandatory. A company is completely free to do as much or as little as it wishes . No regularity bodies or other outside agencies specify what is to be done, for that matter, weather anything is to be done at all. Since managerial accounting is completely optional, the important question is always, "Is the information useful?" rather than, "Is the information required?"

Code of Conduct for Management Accountants:

Practitioners of management accounting and financial management have an obligation to the public, their profession, the organization they serve, and themselves, to maintain the highest standards of ethical conduct. In recognition of this obligation, the Institute of management Accountants has promulgated the following standards of ethical conduct for practitioners of management accounting and financial management. Adherence to these standards internationally is integral to achieving objective of management accounting.

Competence:

Practitioners of management accounting and financial management have a responsibility to:

• Maintain an appropriate level of professional competence by ongoing development of their knowledge and skills.
• Perform their professional duties in accordance with relevant laws, regulations and technical standards.
• Prepare complete and clear reports and recommendations after appropriate analysis of relevant and reliable information

Confidentiality:

Practitioners of management accounting and financial management have a responsibility to:

• Refrain from disclosing confidential information acquired in the course of their work except when authorized, unless legally obligated to do so.
• Inform subordinates as appropriate regarding the confidentiality of information acquired in the course of their work and monitor their activities to assure the maintenance of that confidentiality
• Refrain from using or appearing to use confidential information acquired in the course of their work for unethical or illegal advantage either personally or through third parties.

Integrity:

Practitioners of management accounting and financial management have a responsibility to:

• Avoid actual or apparent conflicts of interest and advise all appropriate parties of any potential conflict.
• Refrain from engaging in any activity that would prejudice their ability to carry out their duties ethically.
• Refuse any gift, favor, or hospitality that would influence or would appear to influence their actions.
• Refrain from either activity or passively subverting the attainment of the organization's legitimate and ethical objectives.
• Recognize and and communicate professional limitations or other constraints that would preclude responsible judgment or successful performance of an activity.
• Communicate unfavorable as well as favorable information and professional judgment or opinion.
• Refrain from engaging or supporting any activity that would discredit the profession.

Objectivity:

Practitioners of management accounting and financial management have a responsibility to:

• Communicate information fairly and objectively
• Disclose fully all relevant information that could reasonably be expected to influence an intended user's understanding of the reports, comments, and recommendations presented.

Resolution of Ethical Conflicts:

In applying the standards of ethical conduct, practitioners of management accounting and financial management may encounter problems in identifying unethical behavior or in resolving an ethical conflict. When faced with significant ethical issues practitioners of management accounting and financial management should follow the established policies of the organization bearing on the resolution of such conflict. If these policies do not resolve the ethical conflict, such practitioner should consider the following course of action.

• Discuss such problems with immediate superior except when it appears that superior is involved, in which case the problem should be presented to the next higher managerial level. If a satisfactory resolution cannot be achieved when the problem is initially presented, submit the issue to the next higher managerial level.
• If the immediate superior is the chief executive officer or equivalent, the acceptable reviewing authority may be a group such as the audit committee, executive committee, board of directors, board of trustees, or owners. Contact with a level above the immediate superior should be initiated only with the superior's knowledge. assuming the superior is not involved. Except where legally prescribed, communication of such problems to authorities or individuals not employed or engaged by the organization is not considered appropriate.
• Clarify relevant ethical issues by confidential discussion with an objective adviser to obtain a better understanding of possible course of action
• Consult your own attorney as to legal obligations and rights concerning the ethical conflict.
• If the ethical conflict still exists after exhausting all levels of internal review, there may be no other recourse on significant matters than to resign from the organization and to submit an informative memorandum to an appropriate representative of the organization. After resignation, depending on the nature of the ethical conflict, it may also be appropriate to notify other parties.

History of Managerial Accounting:

Managerial accounting has its roots in the industrial revolution of the 19th century. During this early period, most firms were tightly controlled by a few owner-managers who borrowed based on personal relationships and their personal assets.
Since there were no external shareholders and little unsecured debt, there was little need for elaborate financial reports. In contrast, managerial accounting was relatively sophisticated and provided the essential information needed to manage the early large scale production of textile, steel, and other products. After the turn of the century, financial accounting requirements burgeoned because of new pressures placed on companies by capital markets, creditors, regulatory bodies, and federal taxation of income. Johnson and Kaplan state that "many firms needed to raise funds from increasingly widespread and detached suppliers of capital. To tap these vast reservoirs of outside capital, firms' managers had to supply audited financial reports. And because outside suppliers of capital relied on audited financial statements, independent accountants had a keen interest in establishing well defined procedures for corporate financial reporting. The inventory costing procedure adopted by public accountants after the turn of the century had a profound effect on management accounting. As a consequence, for many decades, management accountants increasingly focused their efforts on ensuring that financial accounting requirements were met and financial reports were released on time. The practice of management accounting stagnated. In the early part of the century, as product line expanded operations became more complex, forward looking companies saw a renewed need for management-oriented reports that was separate from financial reports. But in most companies, management accounting practices up through the mid-1980s were largely indistinguishable from practices that were common prior to world war I. In recent years, however, new economic forces have led to many important innovations in management accounting.  These new practices are discussed in other chapters. 

Need for Managerial Accounting Information:

Every organization-large and small-has managers. Someone must be responsible for making plans, organizing resources, directing personnel, and controlling operations. Every where mangers carry out three major activities-planning, directing and motivating, and controlling.

Planning:

Planning involves selecting a course of action and specifying how the action will be implemented. The first step in planning is to identify the alternatives and then to select from among the alternatives the one that does the best job of furthering the organization's objectives. While making choices management must balance the opportunity against the demands made on the companies resources.

The plans of management are often expressed formally in budgets, and the term budgeting is applied to generally describe the planning process. Budgets are usually prepared under the direction of controller, who is the manager in charge of the accounting department. Typically, budgets are prepared annually and represent management's plans in specific, quantitative terms.

Directing and Motivating:

In addition to planning for the future, managers must oversee day-to-day activities and keep the organization functioning smoothly. This requires the ability to motivate and affectively direct people. Managers assign tasks to employees, arbitrate disputes, answer questions, solve on-the-spot problems, and make many small decisions that affect customers and employees. In effect, directing is that part of the manager's work that deals with the routine and the here and now. Managerial accounting data, such as daily sales reports are often used in this type of day-to-day decision making.

Controlling:

In carrying out the control function, managers seek to ensure that the plan is being followed. Feedback, which signals operations are on track, is the key to effective control. In sophisticated organizations, this feedback is provided by detailed reports of various types. One of these reports, which compares budgeted to actual results, is called a performance report. Performance report suggest where operations are not proceeding as planned and where some parts of the organization may require additional attention.

The Planning and Control Cycle:

The work of management can be summarized in a model. The model, which depicts the planning and control cycle, illustrates the smooth flow of management activities from planning through directing and motivating, controlling, and then back to planning again. all of these activities involve decision making. So it is depicted as the hub around which the activities revolve.

Introduction to Managerial Accounting (Cost or Management Accounting)

Introduction to Managerial Accounting (Cost or Management Accounting)

What is Managerial Accounting (Management Accounting / Cost Accounting)?

Managerial accounting is concerned with providing information to managers-that is, people inside an organization who direct and control its operation. In contrast, financial accounting is concerned with providing information to stockholders, creditors, and others who are outside an organization.

Managerial accounting provides the essential data with which the organizations are actually run. Managerial accounting is also termed as management accounting or cost accounting. Financial accounting provides the scorecard by which a company's overall past performance is judged by outsiders. Managerial accountants prepare a variety of reports. Some reports focus on how well managers or business units have performed-comparing actual results to plans and to benchmarks. Some reports provide timely, frequent updates on key indicators such as orders received, order backlog, capacity utilization, and sales. Other analytical reports are prepared as needed to investigate specific problems such as a decline in the profitability of a product line. And yet other reports analyze a developing business situation or opportunity. In contrast, financial accounting is oriented toward producing a limited set of specific prescribed annual and quarterly financial statements in accordance with Generally Accepted Accounting Principles (GAAP). (Ray H. Garrison, Eric W. Noreen 1999).

Financial Accounting Vs Managerial Accounting - Difference between financial and Managerial Accounting:

 

This contrast in basic orientation results in a number of major differences between financial and managerial accounting, even though both financial and managerial accounting often rely on the same underlying financial data. In addition to the to the differences in who the reports are prepared for, financial and managerial accounting also differ in their emphasis between the past and the future, in the type of data provided to users, and in several other ways. These differences are discussed in the following paragraphs.

Emphasis on the Future:

Since planning is such an important part of the manager's job, managerial accounting has a strong future orientation. In contrast, financial accounting primarily provides summaries of past financial transactions. These summaries may be useful in planning, but only to a point. The future is not simply a reflection of what has happened in the past. Changes are constantly taking place in economic conditions, and so on. All of these changes demand that the manager's planning be based in large part on estimates of what will happen rather than on summaries of what has already happened.

Relevance of  Data:

Financial accounting data are expected to be objective and verifiable. However, for internal use the manager wants information that is relevant even if it is not completely objective or verifiable. By relevant, we mean appropriate for the problem at hand. For example, it is difficult to verify estimated sales volumes for a proposed new store at good Vibrations, Inc., but this is exactly the type of information that is most useful to managers in their decision making. The managerial accounting information system should be flexible enough to provide whatever data are relevant for a particular decision.

Less Emphasis on Precision:

Timeliness is often more important than precision to managers. If a decision must be made, a manager would rather have a good estimate now than wait a week for a more precise  answer. A decision involving tens of millions of dollars does not have to be based on estimates that are precise down to the penny, or even to the dollar. In fact, one authoritative source recommends that, "as a general rule, no one needs more than three significant digits., this means, for example, that if a company's sales are in the hundreds of millions of dollars, than nothing on an income statement needs to be more accurate than the nearest million dollars. Estimates that accurate to the nearest million dollars may be precise enough to make a good decision. Since precision is costly in terms of both time and resources, managerial accounting places less emphasis on precision than does financial accounting. In addition, managerial accounting places considerable weight on non monitory data, for example, information about customer satisfaction is tremendous importance even though it would be difficult to express such data in monitory form.

Segments of an Organization:

Financial accounting is primarily concerned with reporting for the company as a whole. By contrast, managerial accounting forces much more on the parts, or segments, of a company. These segments may be product lines, sales territories divisions, departments, or any other categorizations of the company's activities that management finds useful. Financial accounting does require breakdowns of revenues and cost by major segments in external reports, but this is secondary emphasis. In managerial accounting segment reporting is the primary emphasis.

Generally Accepted Accounting Principles (GAAP):

Financial accounting statements prepared for external users must be prepared in accordance with generally accepted accounting principles (GAAP). External users must have some assurance that the reports have been prepared in accordance with some common set of ground rules. These common ground rules enhance comparability and help reduce fraud and misrepresentations, but they do not necessarily lead to the type of reports that would be most useful in internal decision making. For example, GAAP requires that land be stated at its historical cost on financial reports. However if, management is considering moving a store to a new location and then selling the land the store currently sits on, management would like to know the current market value of the land, a vital piece of information that is ignored under generally accepted accounting principles (GAAP).

Managerial AccountingNot Mandatory:

Managerial accounting differs from financial accounting in a number of ways that are briefly discussed below.  for a detailed study of the difference between financial and managerial accounting.
 

Financial Accounting		Managerial Accounting
►	Reports to those outside the organization owners, lenders, tax authorities and regulators.	►	Reports to those inside the organization for planning, directing and motivating, controlling and performance evaluation.
►	Emphasis is on summaries of financial consequences of past activities.	►	Emphasis is on decisions affecting the future.
►	Objectivity and verifiability of data are emphasized.	►	Relevance of items relating to decision making is emphasized.
►	Precision of information is required.	►	Timeliness of information is required.
►	Only summarized data for the entire organization is prepared.	►	Detailed segment reports about departments, products, customers, and employees are prepared.
►	Must follow Generally Accepted Accounting Principles (GAAP).	►	Need not follow Generally Accepted Accounting Principles (GAAP).
►	Mandatory for external reports.	►	Not mandatory.

Managerial accounting is managers oriented therefore its study must be preceded by some understanding of what managers do, the information managers need, and the general business environment. Accordingly we shall briefly examine these subjects.

Full cost accounting

Full cost accounting (FCA)
generally refers to the process of collecting and presenting information (costs as well as advantages) for each proposed alternative when a decision is necessary. It is a conventional method of cost accounting that traces direct costs and allocates indirect costs.  A synonym, true cost accounting (TCA)
is also often used. Experts consider both terms problematic as definitions of "true" and "full" are inherently subjective (see Green economics for more on these problems).

Contents 1 Basis of triple bottom line 2 Concepts 2.1 Costs rather than outlays 2.2 Hidden costs 2.3 Overhead and indirect costs 2.4 Past and future outlays 3 Examples of full-cost accounting 3.1 Waste management 3.1.1 Benefits to waste management 4 Motives for adoption 5 See also 6 References

Basis of triple bottom line

Since costs and advantages are usually considered in terms of environmental, economic and social impacts, full or true cost efforts are collectively called the "triple bottom line". A large number of standards now exist in this area including Ecological Footprint, eco-labels, and the United Nations International Council for Local Environmental Initiatives approach to triple bottom line using the ecoBudget metric. The International Organization for Standardization(ISO) has several accredited standards useful in FCA or TCA including for greenhouse gases, the ISO 26000 series for corporate social responsibility coming in 2010, and the ISO 19011 standard for audits including all these.
Because of this evolution of terminology in public sector use especially, the term ounting, e.g. infrastructure management and finance. Use of the terms FCA or TCA usually indfull-cost accounting is now more commonly used in management accicate relatively conservative extensions of current management practices, and incremental improvements to GAAP to deal with waste output or resource input.
These have the advantage of avoiding the more contentious questions of social cost.

Concepts

Full cost accounting embodies several key concepts that distinguish it from standard accounting techniques. The following list highlights the basic tenets of FCA.

1. Accounting for costs rather than outlays
2. Accounting for hidden costs and externalities
3. Accounting for overhead and indirect costs
4. Accounting for past and future outlays
5. Accounting for costs according to lifecycle of the product

 Costs rather than outlays

An outlay is an expenditure of cash to acquire or use a resource. A cost is the cash value of the resource as it is used. For example, an outlay is made when a vehicle is purchased, but the cost of the vehicle is incurred over its active life (e.g., 10 years). The cost of the vehicle must be allocated over a period of time because every year of its use contributes to the depreciation of the vehicle's value.

 Hidden costs

With FCA, the value of goods and services is reflected as a cost even if no cash outlay is involved. One community might receive a grant from a state, for example, to purchase equipment. This equipment has value, even though the community did not pay for it in cash. The equipment, therefore, should be valued in an FCA analysis.

Overhead and indirect costs

FCA accounts for all overhead and indirect costs, including those that are shared with other public agencies. Overhead and indirect costs might include legal services, administrative support, data processing, billing, and purchasing. Environmental costs as indirect costs include the full range of costs throughout the life-cycle of a product (Life cycle assessment), some of which even do not show up in the firm's bottom line.  It also contains fixed overhead, fixed administration expense etc.

Past and future outlays

Past and future cash outlays often do not appear on annual budgets under cash accounting systems. Past (or upfront) costs are initial investments necessary to implement services such as the acquisition of vehicles, equipment, or facilities. Future (or back-end) outlays are costs incurred to complete operations such as facility closure and postclosure care, equipment retirement, and post-employment health and retirement benefits.

Examples of full-cost accounting

Waste management

For example, the State of Florida uses the term full cost accounting for its solid waste management. In this acceptance, FCA is a systematic approach for identifying, summing, and reporting the actual costs of solid waste management. It takes into account past and future outlays, overhead (oversight and support services) costs, and operating costs.
Integrated solid waste management systems consist of a variety of municipal solid waste (MSW) activities and paths. Activities are the building blocks of the system, which may include waste collection, operation of transfer stations, transport to waste management facilities, waste processing and disposal, and sale of byproducts. Paths are the directions that MSW follows in the course of integrated solid waste management (i.e., the point of generation through processing and ultimate disposition) and include recycling, composting, waste-to-energy, and landfill disposal. The cost of some activities is shared between paths. Understanding the costs of MSW activities is often necessary for compiling the costs of the entire solid waste system, and helps municipalities evaluate whether to provide a service itself or contract out for it. However, in considering changes that affect how much MSW ends up being recycled, composted, converted to energy, or landfilled, the analyst should focus the costs of the different paths. Understanding the full costs of each MSW path is an essential first step in discussing whether to shift the flows of MSW one way or another.

Benefits to waste management

Identify the costs of MSW management
When municipalities handle MSW services through general tax funds, the costs of MSW management can get lost among other expenditures. With FCA, managers can have more control over MSW costs because they know what the costs are.
See through the peaks and valleys in MSW cash expenditures
Using techniques such as depreciation and amortization, FCA produces a more accurate picture of the costs of MSW programs, without the distortions that can result from focusing solely on a given year's cash expenditures.
Explain MSW costs to citizens more clearly
FCA helps you collect and compile the information needed to explain to citizens what solid waste management actually costs. Although some people might think that solid waste management is free (because they are not billed specifically for MSW services), others might overestimate its cost. FCA can result in "bottom line" numbers that speak directly to residents. In addition, public officials can use FCA results to respond to specific public concerns.
Adopt a business like approach to MSW management
By focusing attention on costs, FCA fosters a more businesslike approach to MSW management. Consumers of goods and services increasingly expect value, which means an appropriate balance between quality and cost of service. FCA can help identify opportunities for streamlining services, eliminating inefficiencies, and facilitating cost-saving efforts through informed planning and decision-making.
Develop a stronger position in negotiating with vendors
When considering privatization of MSW services, solid waste managers can use FCA to learn what it costs (or would cost) to do the work. As a result, FCA better positions public agencies for negotiations and decision-making. FCA also can help communities with publicly run operations determine whether their costs are competitive with the private sector.
Evaluate the appropriate mix of MSW services FCA gives managers the ability to evaluate the cost of each element of their solid waste system, such as recycling, composting, waste-to-energy, and landfilling. FCA can help managers avoid common mistakes in thinking about solid waste management, notably the error of treating avoided costs as revenues.
Fine-tune MSW programs As more communities use FCA and report the results, managers might be able to "benchmark" their operations to similar communities or norms. This comparison can suggest options for "re-engineering" current operations. Furthermore, when cities, counties, and towns know what it costs to manage MSW independently, they can better identify any savings that might come from working together.

Motives for adoption

Various motives for adoption of FCA/TCA have been identified. The most significant of which tend to involve anticipating market or regulatory problems associated with ignoring the comprehensive outcome of the whole process or event accounted for. In green economics, this is the major concern and basis for critiques of such measures as GDP. The public sector has tended to move more towards longer term measures to avoid accusations of political favoritism towards specific solutions that seem to make financial or economic sense in the short term, but not longer term.
Corporate decision makers sometimes call on FCA/TCA measures to decide whether to initiate recalls, practice voluntary product stewardship (a form of recall at the end of a product's useful life). This can be motivated as a hedge against future liabilities arising from those who are negatively affected by the waste a product becomes. Advanced theories of FCA, such as Natural Step, focus firmly on these. According to Ray Anderson, who instituted a form of FCA/TCA at Interface Carpet, used it to rule out decisions that increase Ecological Footprint and focus the company more clearly on a sustainable marketing strategy.
The urban ecology and industrial ecology approaches inherently advocate FCA - treating the built environment as a sort of ecosystem to minimize its own wastes.