Easyjet Plc- Management Accounting, Accounting Disclosures, Factors Affecting Decision Making - Case Study Example

EasyJet Plc Table of Contents Table of Contents 2 Introduction 3 Part A- Summary of the Company 4 Part B- Management Accounting Information 5 Part C-Evaluation of Accounting Disclosures 6 Part D- Factors Affecting Managerial Decision Making 7 Conclusion 8 References 9 Introduction Accounting and finance are the prime requisite of any company operating in the different spheres of the society. Depending on the various needs of a company, accounting and finance are observed to be an essential component for the functioning and the management of the overall business operations of a company. Furthermore, with the growth in the needs of reporting, the maintenance of financial accounting is observed to have a huge influence on the overall management system (Bushman and Smith, 2001: 237-238). In the contemporary era, investors recognise information derived from both management and financial accounting as an important source of information for making any investment related decision. This phenomenon is even likely to enhance the ability of the overall operations of a business. Additionally, the proper management of the accounts even enhances the ability of a company to develop its relevance and improve its credibility to operate. The need for budgeting as well as variance analysis has been one of the major needs of the companies to develop their ability to perform (Bushman and Smith, 2001: 237-238). With this concern, the paper elaborates on the different accounting disclosure and management of accounting practices followed by EasyJet Plc. Moreover, the essay further describes the use of budgeting, variance analysis and activity based information disclosed by the company. Finally, the paper expounds different factors that the managers are likely to consider for decision-making purpose relevant to Management Accounting. Part A- Summary of the Company EasyJet Plc is a British airline company headquarter in London that has been catering services to a huge base of consumers across the globe. The company has gained the reputation of being one of the largest service providers in the airline sectors based on the number of passengers it carries. The company even has a huge employee base through which it has been providing excellent services to its consumers across the globe. The company to develop its competitive edge has been providing services to the consumers by offering low cost carriers as well as high cost carriers to consumers so that they can meet with the demands for the different consumers and their varied needs (EasyJet Plc. 2014). The company has been operating efficiently through its different branches across 30 countries. The company has a fleet of 200 Airbuses providing services through 600 routes to around 60 million passengers globally. By providing quality services to its consumers, the company has been developing its credibility among its loyal customers. Additionally, the company has stressed on ensuring adequate safety of its employees as well as customers with the objective of delivering superior quality services (EasyJet Plc. 2014). Moreover, with the superior quality services the company has been efficiently handling its huge base of employees and efficiently meeting the needs of its consumers. The increased ability of the company is observed to act as an added advantage for it to meet the needs of its customer effectively and sustain business profitably in the current highly competitive airline industry. The company has been efficiently developing the strategies of horizontal expansion to deal with the diverse challenges and enhance its core competency to develop its competitive position within the same service sector. The strategic takeover of the rival companies has further enabled the company to develop monopolistic control over the global market within the sector (1EasyJet Plc. 2014). Part B- Management Accounting Information Management accounting helps in developing the overall value of the different ethical concerns related to management. The company has been successfully developing the overall management of its accounts in order to enhance its management practices that are prevalent within the organisation. Disclosure of reporting that is conducted through the practice of the management accounting helps the managers to get a complete overview of the different operations of the company. This even enhances a better understanding of both the financial and non-financial transactions within the company (Alleyne and Weekes-Marshall, 2011: 49-50). For EasyJet Plc. the disclosure of reports has been one of the major needs. The wide network of services helps in developing the overall management of operations and maintaining the quality of services. For a company like the EasyJet Plc, it is essential to maintain a high level of transparency in order to attain the confidence of its stakeholders and ensure smooth functioning of its operation. The managers within the company through the efficient management of accounts enhance their ability to maintain a stable rate of profit across all its branches. This helps the managers of the company to enhance their capacity to align the individual goals with the organisational objectives and improve the overall performance of the company. By effectively disclosing financial transactions, the company has been successfully handling the faith of the stakeholders (2EasyJet Plc. 2014; Ward and Graves, 2005: 3-6). Part C- Evaluation of Accounting Disclosures Accounting disclosures helps a company to maintain its overall accounting standards. This even enhances its transparency and further assists in building formidable reputation among its stakeholders. The maintenance of budgets helps companies to assess its projected expenses and maintain budget accordingly. In this regard, it has been noted that the companies develop its budgets to maintain the transparency of accounts necessary for proper management of its operation. EasyJet Plc has established a portfolio management office and has a wide base of project teams that helps the company to chalk out its budgetary needs. This helps the company to plan its projects and even keep records of the financial transaction for various legal and commercial purposes. Furthermore, the budgetary disclosure helps the board of directors to compare the budgets of the previous years and decide projects that are to be taken accordingly. This helps to maintain its financial competencies and enhances its ability perform competitively (EasyJet Plc., 2014; EasyJet Plc., 2013). The need of budgetary planning will help the company to develop its overall financial position and enhance stability to perform in the long term. This is even noted that the overall development of the different aspects helps in enhancing its operations across the different locations of its operation. The comparison and contrast of the budgeted amount facilitate EasyJet Plc to choose the best deal based on its experience. This even enhances the credibility of the organisation to anticipate the variances between the amounts, the computation enhances the relevance of the project managers to accept and reject projects (EasyJet Plc., 2013; Harris and Ohlson, 1990: 764-765). The various financial transactions that are related to the operations of the business help in developing the overall business operations. EasyJet Plc has been developing its sustainable domain and maintaining its level of activity based disclosures both in terms of financial and nonfinancial operations. On a larger note, the contrast and comparison of the financial transactions over tenure of two to three years enhance the ability of the company to meet with the diverse financial needs of the dynamic business environment (EasyJet Plc., 2014). Part D- Factors Affecting Managerial Decision Making Several factors affect the managerial decisions that are to be undertaken by a company in terms of its financial transactions. The different financial transactions that are undertaken by the company at the different sectors of its operations provide useful information essential for managerial decision-making. The major targets of the managers are to maintain a transparent system that would enhance the ability of the organisation to perform in the global domain (Al-Tarawneh, 2012: 2-3). In this regard, the managers at the EasyJet Plc has been majorly inclined towards maintaining their decision making based on the budgetary needs of the company. The variance analysis as well as the activity based disclosures acts as a major support to enhance the overall decision making of the managers operating within the company. This financial account enhances the ability of the company to maintain a proper position within the society and further maintain its level of services. Proper assessment helps the managers to maintain transparency among the accounts and develop the relevance of the company to perform. The financial disclosure helps the company to develop its overall planning and acts as a factor for decision-making (EasyJet Plc., 2014). Conclusion The overall management of any company is based on various factors that primarily include the financial transactions. These factors ensure efficient management of the different transactions and enhance its ability to perform efficiently. Accounting disclosures are among the most important aspect of a modern accounting system that ensures an effective performance of the company in the global as well as local spheres. In this regard, EasyJet Plc has been effectively managing its various disclosures to maintain the transparency of operations and further develop the overall performance of the company. The disclosures both financial as well as non-financial transaction enhances the ability of the managers to take effective decisions that would improvise the overall performances. Furthermore, the various accounting disclosures that are incorporated by the company enhance the transparency of its operations and motivate the stakeholders to perform better for the accomplishment of their personal and organisational goals. The disclosures of the financial transactions help the company to anticipate the projected risks and enhance the ability of the managers for decision-making. The accounting disclosures maintained by the company helps in developing the ability of the company to perform and develop their overall ability to sustain in the current highly competitive airline industry. References Alleyne, P. and Weekes-Marshall, D. (2011) ‘An exploratory study of management accounting practices in manufacturing companies in Barbados.’ International Journal of Business and Social Science, 2(9) pp. 49-58. Al-Tarawneh, H. A. (2012) ‘The main factors beyond decision making.’ Journal of Management Research, 4(1), pp. 1-23. Bushman, R. M. and Smith, A. J. (2001) ‘Financial accounting information and corporate governance.’ Journal of Accounting and Economics, 32 pp. 237-333. 1EasyJet Plc. (2014) About Us. [Online] [Accessed on 28th January 2015] http://corporate.easyjet.com/about-easyjet.aspx?sc_lang=en 2EasyJet Plc. (2014) Our Performance. [Online] [Accessed on 28th January 2015] http://corporate.easyjet.com/about-easyjet/our-performance.aspx?sc_lang=en EasyJet Plc. (2014) Annual Report and Accounts. [Online] [Accessed on 28th January 2015] http://corporate.easyjet.com/~/media/Files/E/Easyjet-Plc-V2/pdf/investors/result-center-investor/annual-report-2014.pdf EasyJet Plc. (2013) Annual Report and Accounts. [Online] [Accessed on 28th January 2015] http://corporate.easyjet.com/~/media/Files/E/Easyjet-Plc-V2/pdf/investors/result-center-investor/annual-report-2013.pdf Harris, T. S. and Ohlson, J. A. (1990) Accounting disclosures and the markets valuation of oil and gas properties: evaluation of market efficiency and functional fixation. The Accounting Review, 65(4) pp. 764-780. Ward, Y. and Graves, A. (2005) ‘A new cost management & accounting approach for lean enterprise.’ Working Paper Series, pp. 1-43. Read More