Costs as Instruments of Decision Making Process in Competitive Economies

Costs as Instruments of Decision Making Process in Competitive Economies

Carmen Veronica Zefinescu (Petroleum-Gas University, Ploiesti, Romania)
Copyright: © 2016 |Pages: 14
DOI: 10.4018/IJSEM.2016040104


In contemporary and competitive economies costs represents an important instrument in the decision making process. The decision making process at the company's management level is defined by a variety of interrelated managerial decisions, setting goals, directions and ways of achieving them, ensuring economic and financial self-regulation as a whole. In the framework of the paper, it was conducted a survey on the use of cost in modern companies' decision-making under conditions of environmental challenges. General assumptions were made and statistics based on the theme explored. It was also performed an analysis of the data processed, which took into account checking assumptions.
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2. Purposes Of Relevance Regarding The Cost Approaches In Decision-Making

The relevance of accounting information represents one of the important qualitative characteristics and is relating to their ability to influence investors, creditors and other users you have financial statements in making decisions. Relevant information helps users evaluate the events of past, present or future to confirm and correct any mistakes of the past. Relevance of information regarding a particular element which must be recognized in the financial statements cannot be determined in isolation, but must be assessed in the context of the principal objective of financial reporting, to provide useful information for taking decisions on investments financing or operation. (Lungu, 2007)

Thus, the relevance, designed to ensure the provision of correct information in order to take the correct decisions, achieve the goal through two values:

  • 1.

    Predictive: Uses information offered by the past and present to guide future decision-making;

  • 2.

    Confirmation: Provides the basis of a comparison of the effects of decisions taken in the past on the basis of the information in the financial statements projected on decisions which might be used on the basis of present situations.

Relevant information, which when used can make the difference between users’ decisions, must have predictive and/or retrospective value. Also it is significant if omitting them would be able to influence the decisions that users take based on information of a specific entity. (FASB, Conceptual Framework for Financial Reporting, 2011).

Management decision should be based on relevant costs, recognized by their forecast, which includes hidden costs, social costs and external costs. Because decisions aimed at future action, requesting detailed information about future costs, some of those not being included in the data collection system of managerial accounting. (Cokins et al., 2012)

The concept of significance is found in the majority of operations that one firm carried out and of the decisions that we take, as well as in economic and financial analysis of the company in question. The meaning is generally a constant financial reporting and in particular a core feature of the presentation, recognition and evaluation of the financial statements, publication and the audit of the financial statements. (Lungu, 2007)

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