The implementation of Activity-Based Costing in China: An innovation action research approach

Research on Activity-Based Costing and its applications has mainly been focused on organisations in developed countries. Little has been learnt as to whether ABC techniques can be implemented successfully in organisations in developing countries. With the adoption of an innovation action research approach, we have successfully developed an ABC system jointly with a large Chinese manufacturing company, Xu Ji Electric Co. Ltd. (Xu Ji), for the period 2001–2005. The research provides a unique opportunity to examine some key success factors pertinent to ABC implementation within a Chinese organisational and cultural setting. The findings indicate that top management support, which has been identified as an important success factor in ABC literature, is evidently the predominant success factor in this organisation. In addition, Xu Ji's corporate culture of “top–down” instigation of the adoption of a series of management innovations (e.g., Economic-Value Added^®, Balanced Scorecards and Six Sigma) and its hierarchical command and communication structure, coupled with active involvement of a high proportion of dedicated professionals, can be seen as another success factor in achieving a relatively high level of diffusion of this accounting concept within the organisation. This study also reveals a different insight of internal resistance to change, which is contrary to the evidence presented in the existing ABC literature.     

The fragmented communication structure within the accounting academia: the case of activity-based costing research genres

The major purpose of this study is to examine the communication structures within the management accounting academia, with a view to illustrating and thereby possibly alleviating the difficulties of dialogue between the different discussion circles identifiable within the field. Research on activity-based costing (ABC) is used as an illustrating example case. We distinguish three genres of ABC research (Consulting research, Basic research, and Critical research) and analyse their nature as well as their internal and external communication patterns. We are particularly interested in the interests of knowledge, research methods, argumentation styles, and results of these genres. Also, we will pay attention to their effects both on the progress of science and management accounting practice. The theoretical points of support lean on the ideas of Bourdieu, Gadamer, Habermas, Latour, and Stegmüller. Overall, the field of ABC research appears to be fragmented. Our analysis suggests that the current communication pattern between various research genres is not inclined to enhance the accumulation of accounting knowledge. Applying the ideas of Stegmüller (1969), we conclude that the discussion circles within the accounting academia appear to be estranged to an extent to which the arguments of researchers representing different approaches do not frequently meet each other, resulting in the unfruitful development of knowledge.     

Transferring knowledge across sub-genres of the ABC implementation literature

In the last decade, a continuous stream of empirical articles has investigated how various implementation process factors (including, top management support, adequate resources, and ABC training) influence ABC implementation success. However, at the same time, a growing number of researchers have criticised this ‘mainstream approach’ for, among other things, neglecting issues of power and politics and for viewing ABC implementations as something inherently positive. Based on Lukka and Granlund's [Lukka, K., Granlund, M., 2002. The fragmented communication structure within the accounting academia: the case of activity-based costing research genres. Acc. Organ. Soc. 27, 165–190] call for communication between various streams of ABC research, the purpose of this paper is to discuss how the ‘mainstream’ implementation literature may benefit from insights made in the politically oriented literature. A key conclusion is that such an analysis not only provides us with enriched explanations of the relatively strong and coherent findings in the ‘mainstream’ ABC implementation literature, but has also the potential to explain ‘unexpected’ and ‘contradictory’ results found in this stream of research. Based on these observations, a number of directions for future research are proposed.     

International Accounting Standards and Accounting Quality

We examine whether application of International Accounting Standards (IAS) is associated with higher accounting quality. The application of IAS reflects combined effects of features of the financial reporting system, including standards, their interpretation, enforcement, and litigation. We find that firms applying IAS from 21 countries generally evidence less earnings management, more timely loss recognition, and more value relevance of accounting amounts than do matched sample firms applying non‐U.S. domestic standards. Differences in accounting quality between the two groups of firms in the period before the IAS firms adopt IAS do not account for the postadoption differences. Firms applying IAS generally evidence an improvement in accounting quality between the pre‐ and postadoption periods. Although we cannot be sure our findings are attributable to the change in the financial reporting system rather than to changes in firms' incentives and the economic environment, we include research design features to mitigate effects of both.     

Exploring the Impacts of the COVID-19 Pandemic on Productivity: A Study of Accounting Faculty Who Are Caregivers of Children*

This study explores how the COVID-19 pandemic affected the productivity of accounting faculty who identify as caregivers of children. We examine the effects on caregivers of children because of the significant shift in the family-work interface that resulted from remote working and learning. We draw on existing family-work conflict research to develop four hypotheses that explore why the productivity of accounting faculty who are caregivers of children might be affected differently during the pandemic than that of accounting faculty who are non-caregivers of children. We surveyed accounting faculty primarily across Canada and the United States. We find that accounting faculty caring for children during the pandemic experienced reduced research, teaching, and service productivity because of increased family-work conflict and depletion. We supplement our main findings with an analysis of open-ended questions to further understand productivity changes and supports for research, teaching, and service. Our study contributes to research examining family-work conflict, employee productivity, and the accounting profession by making practical recommendations for providing targeted support for caregivers of children during times of crisis.     

A survey of factors influencing the choice of product costing systems in UK organizations

This paper reports on the findings of a postal questionnaire that examines the extent to which potential contextual factors influence the characteristics of product costing systems. Prior research has mostly used the adoption or non-adoption of ABC systems to capture the characteristics of product costing systems. This research has generally been inconclusive and has been unable to establish strong links between ABC adoption and those contextual factors that have been identified in the literature that are conducive to the adoption of ABC systems. Instead of using only the adoption or non-adoption of ABC systems as a measure of product cost system design this research uses four different proxy measures of cost system sophistication to capture the characteristics of the product costing systems. This allows for a more robust test of the relations among the predictor variables and cost system sophistication. Results indicate that higher levels of cost system sophistication are positively associated with the importance of cost information, extent of use of other innovative management accounting techniques, intensity of the competitive environment, size, extent of the use of JIT/lean production techniques and the type of business sector. No association was found between the level of cost system sophistication and cost structure, product diversity and quality of information technology.     

The role of manufacturing practices in mediating the impact of activity-based costing on plant performance

We study the impact of activity-based costing (ABC) on adoption of world-class manufacturing (WCM) practices and plant performance. In contrast to earlier research that estimates the direct impact of ABC on plant performance, we develop an alternative research model to study the role of world-class manufacturing practices as a mediator of the impact of ABC. Analysis of data from a large cross-sectional sample of US manufacturing plants indicates that ABC has no significant direct impact on plant performance, as measured by improvements in unit manufacturing costs, cycle time, and product quality. We find, however, that WCM practices completely mediate the positive impact of ABC on plant performance, and thus advanced manufacturing capabilities represent a critical missing link in understanding the overall impact of ABC. Our results provide a different conceptual lens to evaluate the relationship between ABC adoption and plant performance, and suggest that ABC adoption by itself does not improve plant performance.     

Changes in accounting estimates: An update of priors or an earnings management strategy of “last resort”?

Evidence from prior research is mixed about whether accounting estimate changes are strategically motivated, on average, or whether they reflect new or updated information. To interpret this difference, we investigate, by category of material changes in accounting estimates, the association between estimate changes and subsequent restatements. We also explore the determinants of both income-increasing and income-decreasing estimate changes for different categories of estimate changes. We find that the motivations for and the determinants of estimate changes depend on the type of change and on whether the changes in estimates are income-increasing or income-decreasing. Overall, we conclude that when companies are motivated to bias earnings and they cannot do so by manipulating other within generally accepted accounting principles (GAAP) accruals, they sometimes resort to using estimate changes. Our more detailed investigation of estimate changes at the account level suggests a more nuanced view of the determinants of changes in accounting estimates. We develop a more complete model of the determinants of changes in accounting estimates than those used in this emerging literature, which should be of interest to accounting academics, regulators, audit practitioners and audit committee members.     

The Association Between Activity-Based Costing and Manufacturing Performance

This study examines the association between activity-based costing and manufacturing performance. Results using a cross-sectional sample of manufacturing plants indicates that extensive ABC use is associated with higher quality levels and greater improvements in cycle time and quality, and is indirectly associated with manufacturing cost reductions through quality and cycle time improvements. However, on average, extensive ABC use has no significant association with return on assets. Instead, we find weak evidence that the association between ABC and accounting profitability is contingent on the plant's operational characteristics.     

Utilising a typology of management accounting change: An empirical analysis

Management accounting change, currently an increasingly popular focus for research, is not a uniform phenomenon. Its nature and form may vary across multiple dimensions and this variation has been neglected by researchers who have tended to study change per se rather than distinguishing it though a categorisation by type. This paper explores the forms which management accounting change has taken in a sample of manufacturing companies by utilising a simple typology of management accounting system change, derived from the existing research literature, consisting of addition, replacement, output modification, operational modification and reduction. This classification is combined with information on the incidence, location, importance and success of management accounting changes to provide some analytical insights into the variety and patterns of change within these companies and to derive some guidance for future research on the topic.     

The effect of internal control and risk management regulation on earnings quality: Evidence from Germany

We investigate the impact of mandatory internal control and risk management (ICRM) reform on earnings-based attributes of accounting quality in Germany. Although prior studies examine changes in accounting quality under SOX Sections 302 and 404, there is scant evidence of the accounting quality effects of ICRM reform in foreign jurisdictions. Such evidence is warranted given the ongoing global policy debate of ICRM reform in the post-SOX era. We extend existing research by examining changes in earnings quality following the 1998 German legislation on control and transparency (KTG). The KTG regime provides a unique setting in which the regulatory scope extends beyond internal control over financial reporting (ICFR) to include broad business and enterprise risk control. Using both a differences and difference-in-differences research design, we find that German firms experience an increase in timely loss recognition and a decrease in earnings smoothing after KTG. We also find some evidence of a decrease in loss avoidance behavior. Additional analyses show that the sensitivity of capital investment efficiency to earnings quality increases in the German market after KTG, suggesting that earnings quality effects of mandatory ICRM reform has positive consequences for capital resource allocation. Together, our results are consistent with the achievement of one of the intended outcomes of ICRM regulation—increased accounting quality through effective ICRM systems.     

Of stars and galaxies – Co-authorship network and research

We examine the association between network centrality and research using the accounting research community setting. We establish co-authorship network using papers published in the five top accounting journals from 1980 to 2016. We find that the co-authorship network in accounting is a “small world” with some most connected authors playing a key role in connecting others. We use machine learning to label published papers with multiple topics and find patterns in topics over time. More importantly, we find that co-authorship network centrality is positively associated with future research productivity and topic innovation and that the impact of centrality on productivity is higher with more senior authors. Further, centrality of an author’s co-authors also has an incrementally positive impact. We conclude that network centrality positively influences research output.     

Towards explaining activity-based costing failure: accounting and control in a decentralized organization

Many of the activity-based costing (ABC) systems introduced in recent years are said to fail (e.g. Cooperet al., 1992; Argyris and Kaplan, 1994; Shields, 1995; Roberts and Silvester, 1996). The use of ABC for surveillance by the group management, with no consequent actions, leads us to propose that claims on ABC failure result, in part, from assessing the use and value of ABCs from the decision-making perspective. The decision-making perspective may be insufficient for capturing the multitude of uses to which ABCs are put in practise. As this study shows, in the context of strategic decision-making the success of ABC cannot depend on whether its results require any actions or decisions to be taken, but on its ability to make a correct diagnosis of the situation. Consequently, some of the so-called ABC failures may not be failures. They may merely reflect a limited appreciation of the uses of accounting and control systems in practise. Nevertheless, failures and resistance are real in a number of organizations. This study explored the origins of resistance to ABC in a case setting, looking at diverse interests of organizational stakeholders, and the role of existing control and information systems in ABC implementation. We show that the resistance may have several sources; some related to the cost and benefits of ABC, some associated with organizational power and politics, and some pertinent to organization culture. The practical implication of this study hinged on the notion that although the resistance to ABC may come from various sources, these sources appear fundamentally structural and are unlikely to be dealt with by employing implementation-based strategies.     

Management accounting systems, top management team heterogeneity and strategic change

Institutional and market changes force many organizations across economic sectors to reconsider their strategic position and engage in strategic change. Organizations differ in their ability to realize strategic change, however, which appears to depend on several factors in their strategic management process. In this paper we explore two such factors simultaneously, which are the composition of the top management team and the characteristics of the management accounting system. In particular, the paper investigates how top management team heterogeneity affects strategic change both directly, and indirectly, through the design and use of the management accounting system. Hypotheses are developed and tested through a survey study among 103 Spanish public hospitals. We find significant effects of top management team heterogeneity on the extent and direction of strategic change, and find that the use of the management accounting system partially mediates the relationship between top management team heterogeneity and strategic change. The paper contributes to the extant literature on the complex relationships between strategic change and MAS [Gerdin, J., & Greve, J. (2004). Forms of contingency fit in management accounting research – a critical review. Accounting, Organizations and Society, 29, 303–326], by analysing both extent and direction of strategic change, and by recognizing the importance of top management teams’ use of the management accounting system for strategic change.     

论企业年金会计主体

企业年金作为一项新兴的社会保障制度越来越受到我国的关注和重视,对企业年金进行会计研究在我国只是刚刚起步。本文从会计主体角度研究企业年金,关键是从会计理论基础和企业年金制度如何有机结合,如何从企业年金的根本出发点进行会计相关的理论和实务研究,提出适合企业年金制度发展的会计主体理论。     

Political Influence and Coexistence of a Uniform Accounting System and Accounting Standards: Recent Developments in China

This article investigates the role of political influence, as well as accounting tradition and the equity market, in China's recent changes in accounting regulation. We find that the Chinese government, in part self-motivated and in part under external pressure, has been active in developing accounting standards in harmony with international accounting standards. However, it has retained a uniform accounting system in the Enterprise Accounting System issued in 2000 to accommodate the special circumstances of a transforming government, strong state-ownership, a weak accounting profession, a weak and imperfect equity market, and the inertial effect of accounting tradition and cultural factors. This article also contributes to existing models of accounting system classification by illustrating the need for considering political influence as a factor that affects the rate of transition towards full implementation of international accounting standards.     

The Effect of Regulatory Harmonization on Cross‐Border Labor Migration: Evidence from the Accounting Profession

The paper examines whether international regulatory harmonization increases cross‐border labor migration. To study this question, we analyze European Union initiatives that harmonized accounting and auditing standards. Regulatory harmonization should reduce economic mobility barriers, essentially making it easier for accounting professionals to move across countries. Our research design compares the cross‐border migration of accounting professionals relative to tightly matched other professionals before and after regulatory harmonization. We find that international labor migration in the accounting profession increases significantly relative to other professions. We provide evidence that this effect is due to harmonization, rather than increases in the demand for accounting services during the implementation of the rule changes. The findings illustrate that diversity in rules constitutes an economic barrier to cross‐border labor mobility and, more specifically, that accounting harmonization can have a meaningful effect on cross‐border migration.     

The Transformation of an Accounting System During Organisational Change: A Longitudinal Study

Accounting can both shape and be shaped by organisational reality (Nahapiet, 1988). This paper focuses on the shaping of an ABC (activity based costing) system in a public sector authority during a period of rapid change from 1993 to 1998. The reasons why management invested substantially in such a system are outlined, and are compared and contrasted with the views of the employees. Over time the ABC system became locked in as the transfer pricing system to meet the needs of a new style of business unit accountability where quasi–profit centres were set up within a public sector authority. A new CEO eliminated the profit–centre concept and returned to budgetary control as the primary form of financial accountability. At this stage ABC became side–lined but was still useful for strategic decisions relating to out–sourcing and improving lines of business, more in line with its initial objectives. Finally, the paper explores why ABC ceased to exist. It is a rare case of a longitudinal study of an accounting technology in a public sector organisation and provides insights into the moulding of accounting by organisational change.     

Cash-settled convertible bonds and the value relevance of their accounting treatment

Cash settlements became a popular design feature in convertible securities once they obtained favorable accounting treatment for diluted earnings per share in 2002. The unexpected proliferation of cash settlements provoked the FASB to eliminate their favorable accounting treatment in 2008. We find that shareholders of firms that use cash-settled convertibles react negatively to the announcement of these recent changes. Firms that issued cash-settled convertible debt to avoid earnings dilution no longer have an incentive to keep them on their balance sheets. Consistent with this observation, we find that investors respond more favorably if the cash-settled convertibles of these firms include call features. We conclude that call features can be valuable in times of uncertainty related to possible accounting changes as they allow the firm to efficiently mitigate the effects of the accounting changes on their financial reporting.     

Assessing an activity-based costing project

Research dealing with the implementation of system changes such as activity-based costing (ABC) systems is founded largely on a presumption that the motivation for the innovation is economic. The definition of success or failure then rests on the project’s reaching a stage of implementation where the new data are used in routine and/or unforeseen ways to improve economic efficiency. This paper presents a view of an ABC project where complex motivations, both economic and institutional, are identified, these held in turn by different groups within the organization as well as external groups likely to be affected by the project. Seen in terms of its institutional motivations, the project, documented in an internal review as a failure because it was abandoned without using the data, can be defined as a success by at least some of the affected groups.