Value added: A comparative study

This article reports on an investigation into the relationship between corporate value added and its macroeconomic counterparts. The first part demonstrates the effect on macroaccounting identities of conflicting value systems and differing perceptions of wealth creation. Subsequently, these issues are reconsidered in the context of corporate value added measurement. The comparative method is employed to test whether or not current practice is consistent with a model of social consolidation whereby reporting firms, regardless of their location, would disclose their contribution to societal value added.     

Speed Splasher: an interactive,team-based target costing exercise

Target costing is an important strategic cost management topic. The competitive business environment requires firms to produce products with the quality and functionality demanded by customers while at the same time selling them for prices largely determined by the market. Conventional cost management and cost plus pricing strategies are not very effective in this new environment. The design-centered and market-driven focus of the target costing process and the inability of firms to trade off quality and functionality to achieve target costs, are concepts not always easy to demonstrate in an accounting exercise. To overcome this problem, the authors have developed an interactive, in-class, team-based target costing exercise. This problem involves students in the dynamic process required to bring a product to market that simultaneously meets customer requirements for quality, functionality, and price-cost, and the firm's target profit requirement. The authors describe and explain this exercise, and provide guidelines for conducting the exercise in class.     

The case for process mining in auditing: Sources of value added and areas of application

Process mining aims to extract knowledge from the event logs maintained by a company's ERP system. The objective of this paper is to make the case for why internal and external auditors should leverage the capabilities process mining offers to rethink how auditing is carried out. We do so by identifying the sources of value added of process mining when applied to auditing, which are as follows: 1. process mining analyzes the entire population of data and not just a sample; 2. critically that data consists of meta-data—data entered independently of the actions of auditee—and not just data entered by the auditee; 3. process mining allows the auditor to have a more effective way of implementing the audit risk model by providing effective ways of conducting the required walkthroughs of processes and conducting analytic procedures; 4. process mining allows the auditor to conduct analyses not possible with existing audit tools, such as discovering the ways in which business processes are actually being carried out in practice, and to identify social relationships between individuals. It is our argument that these sources of value have not been fully understood in the process mining literature, which has focused on developing it as a statistical methodology rather than on applying it to audit practice. Only when auditors and audit researchers appreciate what is new and unique about process mining will its acceptance in auditing practice become feasible.     

Language in pursuit of professional branding: The case of scientific costing

The period between the 1880s and 1930 witnessed the development of concepts and discourses associated with costing as a science. Against this background, and in the context of the professionalization campaign pursued by the newly established Institute of Cost and Works Accountants (formed in 1919), we employ insights from hermeneutic analysis to examine the ascendancy and subsequent demise of 'scientific costing' as a branding strategy. Building on the earlier work of Loft (1986, 1990), we place these developments within both the internal machinations of the Institute in its early years and the wider context of the business, professional and regulatory environment of the period. We find that the rise and fall from favour of 'scientific costing' was conditioned by a number of contextual factors, not least the changing environment of the early decades of the twentieth century surrounding the emergence of scientism, its links to the efficiency gospel, and a changing rhetoric which shifted towards a business budgeting discourse. These, together with difficulties in finding a common specification of 'scientific costing' limited its usefulness as an organisational branding strategy. Implications are drawn from our study for contemporary attempts to develop branding strategies by professional accounting bodies.     

Exploiting comparative advantage: A paradigm for value added research in accounting information systems

Following the lead of recent papers by Demski [Demski J. Is Accounting an Academic Discipline? Account Horiz 2007;21(2): 153–157], Fellingham [Fellingham J. Is Accounting an Academic Discipline? Account Horiz 2007;21(2): 159–163] and Hopwood [Hopwood A. Whither Accounting Research? Account Rev 2007;82(5): 1365–1374] which questioned the direction and value added of non-AIS accounting research, we discuss the state of research in Accounting Information Systems. AIS researchers face a significant hurdle in undertaking value added research given that the financial and human resources that industry devotes to research and development of AIS technology dwarf the capabilities of academic researchers. In these circumstances, we put forward a paradigm for AIS research based on the principle of comparative advantage, which is the powerful economic force that ensures that trade can take place even between parties where one has an absolute superiority over the other. It is our contention that if AIS academics are to succeed in creating value added research then they have to identify what they can do that the AIS industry, despite all its financial and human resource advantages, cannot or will not do. And what economic theory indicates is that such opportunities to add value always exist — if only academics are willing to seek them out. We illustrate our paradigm by analyzing three potential sources of comparative advantage for AIS researchers and discussing illustrative examples of research in each of these areas.     

Global added value of flexible benefits

Flexible benefits, or "flex," is a strategic human resources solution that can give companies a truly competitive edge in winning the global war for talent and containing costs. Several companies in Asia plan to implement flex in the next few years, and a number of emerging best practices in flexible benefits design are being developed. This article discusses the many advantages of flex, flex best practices emerging across Asia, and important considerations for employers when designing flexible benefits. Finally, the author shows how one global company in Singapore found flex to be an effective differentiator for attracting and retaining talent as well as helping manage employee health care costs.     

Black economic empowerment,legitimacy and the value added statement: evidence from post‐apartheid South Africa

We examine why companies in South Africa voluntarily provide a value added statement (VAS). The VAS can be used by management to communicate with employees and thereby establish a record of legitimacy. Since we want to establish if the VAS is used to establish symbolic or substantive legitimacy, we examine whether production of a VAS is associated with actual performance in labour‐related areas. To measure labour‐related performance, we use an independent Black Economic Empowerment (BEE) rating. We find that BEE performance is significantly and positively related to the voluntary publication of a VAS. Our results suggest that BEE performance and disclosure of a VAS are two elements of a strategy used by South African companies to establish their substantive legitimacy with labour.     

The societal relevance of management accounting innovations: economic value added and institutional work in the fields of Chinese and Thai state-owned enterprises

This paper contributes to the ongoing debate about the relevance of management accounting. In doing so, we widen the definition of ‘relevance’ from the largely managerialist focus dominating this debate to examine how management accounting innovations get imbued with a broader range of societal interests and how actors representing vested interests go about entrenching and resisting such innovations. We explore these issues with reference to the institutionalisation of Economic Value Added (EVA?) as a governance mechanism for Chinese and Thai state-owned enterprises. Adopting a comparative, institutional field perspective, we theorise our observations through the conceptual lens of institutional work, or the human agency involved in creating, maintaining and disrupting institutions. We extend extant research on institutional work by exploring how the evolution of such work was conditioned by differences in field cohesiveness, defined in terms of how consistent and tightly coordinated key interests clustered around EVA? are. Our analysis also draws attention to how different types of institutional work support and detract from each other in the process of upholding such cohesiveness. We discuss the implications for future research on the societal relevance of management accounting innovations and institutional work.     

企业如何改进增值税管理战略

增值税在中国扮演着非常重要的角色,在政府税收收入中占1／3的比重。有关增值税的各项新规正在改变着中国增值税的处理。然而,增值税在企业中却往往成为被忽略的税种。由于属于经常性项目,且通常不会通过科目或财务报表直接表现出来,所以,企业可能会忽视这些成本。在中国,企业很少会配置专门的资源对间接税处理过程中出现的风险和成本进行...     

Nonfinancial performance measures,externalities and target setting: A comparative case study of resolutions through planning

This paper presents an analysis of the resolution of organisational externalities through the use of nonfinancial performance measures for planning. Using a comparative case study, this paper illustrates how centralised controllers’ choice of nonfinancial performance measures and target setting in two companies provides critical information to decentralised agents regarding how to balance their performance with the performance of other decentralised agents in their organisation. This work complements current management accounting research in that it focuses on the role of nonfinancial performance measures with respect to the design of performance plans for decentralised agents that can be used to internalise externalities. To date, discussions of externalities in management accounting research have primarily focused on how performance measurements can be used as a price mechanism to provide decentralised agents with incentives to internalise externalities. In addition, this case study illustrates some of the difficulties related to acquiring general knowledge about the externalities of nonfinancial performance measures and, therefore, about whether specific nonfinancial performance measures are appropriate for a particular type of organisation.     

A spreadsheet analysis of different costing systems

This note describes a project that uses a spreadsheet to illustrate the conceptual similarities and differences between actual, normal, and standard costing systems, under both variable and absorption reporting formats. Budgeting and variance analysis are also included in the illustration. The purpose of the project is to enhance, via a comprehensive numerical example, the student's understanding of these three costing systems. A spreadsheet formulation enables the student to perform sensitivity analysis, while eliminating the need for repetitive income statement formatting and calculations.     

IFRS adoption: A costly change that keeps on costing

This paper documents the results of a study exploring the transitionary and ongoing costs incurred by Australian companies from their use of IFRS. A longitudinal survey approach was adopted. Challenging the underlying logic of convergence, survey results highlighted that IFRS is costly for firms both in the lead up to adoption and thereafter. Specifically, the transition to IFRS imposed significant AIS, staff training and development, financial statement user education, and financial statement adjustment costs on many firms. Furthermore, many firms perceived that IFRS adoption has resulted in an ongoing increase of 20% or more on annual accounting and compliance costs.     

Communicating the economic value of customer ownership in insurance: A qualitative analysis of annual reports

Its distinctive ownership base leads to a customer‐owned mutual insurer representing a mission and purpose of existence that are very different from those of an investor‐owned insurer. While the owner value of the latter can be defined in terms of return on invested capital, in mutuals, the attention is shifted toward benefits and value for customers. Despite this major difference, scholars know little about mutual insurers' value‐creating processes. To begin filling this knowledge gap, the article explores and identifies how managers of mutual insurance companies understand and communicate the economic value of ownership to their customer–owners and other stakeholders. It reports on thematic analysis of annual reports of 18 mutuals, based in seven countries (England, Finland, Ireland, The Netherlands, Sweden, Switzerland, and the United States), on the basis of which the authors offer a tentative framework for enhancing scholars' and practitioners' understanding of how the economic value of ownership is understood in a customer‐owned mutual insurance company.     

The value line enigma (1965–1978): A case study of performance evaluation issues

The performance of Value Line Investment Survey recommendations made between 1965 and 1978 is evaluated by applying a future benchmark technique. The future benchmark technique avoids selection bias problems associated with using historic benchmarks as well as known difficulties of using Capital Asset Pricing Model benchmarks. Potential problems (implicit in the technique) are discussed and resolved within the conduct of the experiment. Results indicate statistically significant abnormal performance when future benchmarks are computed using a market model.     

Measuring the economic value of HMOs

The economic efficiency of HMOs varies dramatically, affected by such factors as market share, provider contracting agreements and utilization management techniques. Employers that establish HMO strategies without conducting quantitative assessments may incur unnecessary costs. A combination of both quantitative and qualitative analyses can lead employers to a best practice system of health care.     

The economic value of VIX ETPs

The fairly new VIX ETPs have been promoted for providing effective and easily accessible diversification, while at the same time having large negative returns. We examine the economic value of using VIX ETPs for diversification of stock–bond portfolios. Our analysis begins in 2009, when the first VIX ETPs are introduced, and therefore only considers the period after the recent financial crisis. For investors with a constant allocation strategy, the diversification benefits of the VIX ETPs do not offset their negative returns. This implies negative economic value of a constant allocation. For a dynamic allocation strategy, including short VIX ETPs in the investment opportunity set can have substantial positive economic value.     

Accounting in its social context: Towards a history of value added in the United Kingdom

Although the relationship between accounting and society has been posited frequently, it has been subjected to little systematic analysis. This paper reviews some existing theories of the social nature of accounting practice and, by so doing, identifies a number of significant conceptual problems. Using the case of the rise of interest in value added accounting in the United Kingdom in the 1970s, the paper conducts a social analysis of this particular event and then seeks to draw out the theoretical issues and problems which emerge from this exercise. Finally, the implications of these for the social analysis of accounting are discussed.     

A commentary on the applications of activity-based costing

Activity-based costing (ABC) has, within the last decade, generated a voluminous literature which has paralleled its increase in popularity with practitioners. This paper reviews ABC's potential by examining applications of it which extend throughout the core areas of management accounting. Consideration is given not only to how it has positively contributed to practice in these areas but also to its rationale and limitations to particular applications. Assessment is also made of how it interacts with longer established management accounting issues such as the variable versus fixed costing debate for income measurement and decision-making, the use of contribution margin analysis, organizational slack in the budgetary control process and conventional variance analysis. Some conclusions are drawn on its value to practitioners and researchers.