Background
Initially, RCA had emerged as a management accounting approach beginning around 2000, and was subsequently developed at CAM-I (The Consortium of Advanced Management, International) in a Cost Management Section RCA interest group commencing in December 2001. Over the next seven years RCA was refined and validated through practical case studies, industry journal publications, and other research papers.
In 2008, a group of interested academics and practitioners established the RCA Institute to introduce Resource Consumption Accounting to the marketplace and raise the standard of management accounting knowledge by encouraging disciplined practices.
By July 2009, Professional Accountants in Business (PAIB) Committee of International Federation of Accountants (IFAC), recognized Resource Consumption Accounting in the International Good Practice Guidance (IGPG) publication called Evaluating and Improving Costing in Organizations and its companion document, Evaluating the Costing Journey: A Costing Levels Continuum Maturity Model. The guide focuses on universal costing principles and with the Costing Levels Maturity Model acknowledges RCA attains a higher level of accuracy and visibility compared to activity based costing for managerial accounting information when the incremental benefits of RCA's better information exceed the incremental administrative effort and cost to collect, calculate and report its information.
As stated in the Internation Good Practice Guidance,
“A sophisticated approach at the upper levels of the continuum of costing techniques provides the ability to derive costs directly from operational resource data, or to isolate and measure unused capacity costs. For example, in the resource consumption accounting approach, resources and their costs are considered as foundational to robust cost modeling and managerial decision support, because an organization’s costs and revenues are all a function of the resources and the individual capacities that produce them.”
— International Federation of Accountants, 2009
Resource Consumption Accounting was also recognized in a Sustainability Framework Report issued by the International Federation of Accountants (IFAC), for having the capability of helping organizations “improve their understanding of environmental (and social) costs through their costing systems and models”. This Sustainability Framework highlights RCA under the sub-heading Improving Information Flows to Support Decision and informs readers that proper cost allocation can be built ‘directly into the cost accounting system’, thereby enhancing an organization's performance for “identifying, defining and classifying costs in a useful way”.
Read more about this topic: Resource Consumption Accounting
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