Constraints accounting is an accounting reporting technique, consistent with a process of ongoing improvement (POOGI). It is an implementation of the Theory of Constraints

Theory of Constraints

The theory of constraints adopts the common idiom "A chain is no stronger than its weakest link" as a new management paradigm. This means that processes, organizations, etc., are vulnerable because the weakest person or part can always damage or break them or at least adversely affect the...

. It is a development of throughput accounting

Throughput accounting

Throughput Accounting is a principle-based and comprehensive management accounting approach that provides managers with decision support information for enterprise profitability improvement. TA is relatively new in management accounting...

.

CA includes:

1. explicit consideration of the role of constraint
   Constraint (mathematics)
   In mathematics, a constraint is a condition that a solution to an optimization problem must satisfy. There are two types of constraints: equality constraints and inequality constraints...
   
   s,
2. specification of throughput contribution effects, and decoupling of throughput
   Throughput
   In communication networks, such as Ethernet or packet radio, throughput or network throughput is the average rate of successful message delivery over a communication channel. This data may be delivered over a physical or logical link, or pass through a certain network node...
   
    (T) from operating expense
   Operating expense
   An operating expense, operating expenditure, operational expense, operational expenditure or OPEX is an ongoing cost for running a product, business, or system . Its counterpart, a capital expenditure , is the cost of developing or providing non-consumable parts for the product or system...
   
   (OE).

Constraints represent part of the third level of the financial reporting conceptual framework developed by the Financial Accounting Standards Board (FASB). In providing information with the qualitative characteristics that make it useful, companies must consider two overriding factors that limit, or constrain, financial reporting. The two dominant constraints are the cost-benefit relationship and materiality. The cost-benefit relationship constraint is pervasive throughout the framework, and materiality is a threshold for recognition in financial reporting.