Issues in Managerial Accounting

¶ … managerial accounting issues for MasterCard Worldwide. MasterCard is a multinational financial services corporation headquartered in Purchase, New York. Originally founded in 1966 as the Interbank Card Association, the company currently serves more than 24,000 financial institutions and other entities in more than 210 countries and territories. With 5,600 employees, the company's mission is promoting new, safer, and more convenient ways to pay, and accelerating the displacement of cash and checks. MasterCard's 2010 revenue was U.S.$5.539 billion, with net income of U.S.$1.846 billion.

According to their website, MasterCard's worldwide network processes more than 23 billion transactions per year. The network has the capacity to handle more than 160 million transactions per hour, with an average network response time of 130 milliseconds and a 99.9% reliability rate. MasterCard's global telecommunications network, known as Banknet, links all MasterCard issuers, acquirers, and data processing centers into a single financial network with its operations hub located in St. Louis, Missouri. Unlike Visa's star-based network where all the network endpoints terminate at one of several main data centers, MasterCard's network lets transactions travel a meshed network directly to other endpoints, without the need to go through a single central point. This configuration allows MasterCard's network to be more resilient, with less downtime. MasterCard completed a major upgrade of its state-of-the-art network in 2001 to further enhance its ability to process transactions safely, securely, and instantly the world over.

One of the services that MasterCard offers is constant monitoring of systems and networks of their customers from its St. Louis-based Operations Command Center. When a customer experiences a network crisis or system interruption, MasterCard can stand-in for a customer network to ensure uninterrupted cardholder services. Management accounting allows for cost records to be maintained for each transaction for each financial institution and lets MasterCard optimally price such services.

The MasterCard Technologies Data Center contains 124 miles of copper infrastructure, 201 miles of fiber infrastructure, and 3.1 petabytes of available storage. The Center generates enough power to support a city of 30,000 people and can operate indefinitely on back-up generators. The Center is staffed around the clock inside a specially built facility that is impervious to extreme weather conditions including fire, flood, tornado and earthquake. MasterCard describes the volume of transactions that the Data Center processes as "vast" and they constantly explore ways to make it more efficient. They use techniques such as cloud computing to help control server sprawl and lessen power consumption, giving them the ability to process substantially more data with a minimal addition of servers.

As this description makes clear, MasterCard's operations are technology driven, much of its management accounting activity is related to IT projects. The size and scope of MasterCard's IT requires that its management accounting track the total cost to deliver and maintain the IT services that the IT organization provides to the business. The value of management accounting is that it allows MasterCard to effectively manage costs and capacity planning. Without a complete understanding of their IT costs, MasterCard would be less able to prices its products for full cost recovery.

Because time is literally money for MasterCard, their IT cost control efforts are especially concerned with creating value for their business units and providing a competitive edge, so there is strategic value to their management accounting processes as well.