Question

An important element in designing accounting-based performance measures is choosing the time horizon of the performance measures. Discuss. What are the factors involved in choosing the timing of the feedback in designing accounting-based performance measures?

Answer 1

Answer:

These factors include different parameters of financial result

Explanation:

It is general belief that management's reliance on measures such as profit or return on capital lead to short-termism. This is a common management oversight in using financial results as a parameter of success at an accounting based performance management. Therefore, it is believed that this approach could be adjusted with the usage of non-financial parameters of result. Time horizon's frequency determination is a necessity when we discuss monitoring of project performances. Completion of project involves three phases:

1. initial
2. progress
3. closure

Parameters like ROI, RI, EVA and ROS all evaluate one period of time, but may be adapted to track multiple time periods