Management accounting practices in Europe: a perspective from the States

I provide a perspective from the States on four questions primarily based on information inManagement Accounting: European Perspectivesedited by Al Bhimani (1996). First, seven factors are identified as having shaped management accounting practices in European nations—academics, education, government, professional associations, consultants, technology, and the inter-nation transfer of information. Second, evidence supports the view that, across European nations, more changes are occurring in management accounting practice terminology and techniques than in the purposes and styles of using management accounting techniques. Third, evidence indicates that there is convergence across European nations in management accounting practices, especially in terminology and techniques, but less convergence in the purposes and styles of using techniques. Fourth, management accounting practices in European nations, particularly terminology and techniques, is converging on a global management accounting practice model. I propose that management accounting practices—particularly terminology and techniques—is converging across nations (at least for those firms that are affected by the global economy)anddiverging across industries both within and between nations.     

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.     

Pedagogical cases in the strategic development of management accounting systems

Discussion of the ‘lost relevance’ of management accounting and the ‘gap’ between theory and practice has focused the criticism that management accounting education is built round a set of techniques applied in simplified settings. One reason for this may be the scarcity of case studies, discussing management accounting practices, which may be adopted in classroom situations. The recent promotion of ABC, throughput accounting, just-in-time (JIT) methods and performance measures to support modern manufacturing provide additional educational challenges relating to the integration of these into the accounting curriculum. There is a danger that these may also be developed as other techniques to be learned in isolated situations rather than to be applied selectively by organizations in appropriate situations. This paper offers two case studies which support class discussion of accounting requirements within a modern manufacturing and commercial environment. The cases emphasize that any one technique is inappropriate to all situations. They force examination of manufacturing and marketing policy and strategy in the development of appropriate management accounting information. The authors' experiences of using the case studies is evaluated, to determine the strengths and weaknesses of using the non-numerical cases as a basis for class discussion of contextual factors in accounting system design.     

Management accounting innovations for rationalizing the cost of services: The reassessment of cash and accrual accounting

ABSTRACT

Management accounting can be a useful tool in austerity government because it produces information about the costs of public services and can be used for informed decision-making. Spanish local governments are required to submit data on the cost of their services to central government, which publishes this information online. The calculation of costs is based on budgetary cash accounting instead of accrual accounting; therefore cash accounting is being used for decision-making and accrual accounting has no role in this process. This paper critically analyses the innovation from three perspectives: the use assigned to the cost information in the legal framework; the opinion of academics and experts; and the perception of professionals about the usefulness of the information produced with the new system.     

Management accounting curricula: striking a balance between the views of educators and practitioners

Management accounting education has been subject of considerable debate since the 1970s, particularly in terms of what topics should be taught. The research reported here set out to ascertain the management accounting topics/techniques and the skills/characteristics that are considered important for a graduate who intends to pursue careers in management accounting. Based on a survey conducted on educators and practitioners, the results indicate that educators viewed behavioural implications, activity-based costing (ABC), performance evaluation and product costing as the top four important topics. In contrast, practitioners' top four important topics were cash flow management, operational budgeting, variance analysis and performance evaluation. Overall, traditional techniques, as compared to contemporary techniques, tend to be more widely used by firms. As regards skills and characteristics, practitioners and educators placed high importance on thinking, problem solving, listening and quantitative skills.     

Responsibility cost control system in China: a case of management accounting application

This paper introduces the responsibility cost control system installed at Han Dan Iron and Steel Company in the People’s Republic of China. The Company has adopted a series of management accounting techniques or procedures in its cost control system, including target costing, responsibility accounting, standard costing, flexible budgeting, internal transfer pricing, behavior motivation, performance evaluation, variance analysis, and so on. In particular, the system has integrated responsibility accounting and cost control by introducing market mechanisms to substantially reduce production costs and raise profitability. The successful experiment reveals that the responsibility cost control system is an effective tool for cost control under the changing Chinese business environment. The Han Dan experience demonstrates that management accounting can play a positive role in improving business management and profitability in China or other developing countries. In addition, this study casts light on effective diffusion of management accounting practices under different social and economic systems.     

New development: China promotes government financial accounting and management accounting

In late 2013, China's political leadership decided to require the government to practice accrual accounting and prepare whole-of-government financial reports. This decision was codified in the new budget law and followed up by a State Council directive endorsing the reform proposal of the Ministry of Finance. Some basic government accounting standards have been made public for comment. In the same timeframe, the ministry also decided to promote management accounting in order to raise the competency and contributions of China's millions of accounting personnel.     

Harmonizing public sector accounting in Europe: thinking out of the box

A broad debate about the harmonization of public sector accounting standards in Europe is underway. The authors provide arguments in favour of harmonization, but they also acknowledge the existing pluralism and diversity by taking stock of the state of play in 14 European countries. The paper makes a proposal for a way forward for policy-makers and standard-setters, in which the benefits of harmonization can be obtained without obliging EU member countries to necessarily abandon their current public sector accounting systems.     

Management accounting and accountability in a new reality of everyday life

This paper focuses on the concept ‘accountability’. Individuality and accountability is discussed against the background of management accounting in a privatised company in transition from command to market economy. With Berger, P.L., Luckmann, T., 1966. The social construction of reality. A Treatise on the Sociology of Knowledge. Garden City, New York, Doubleday/Anchor, the accountability concept is presented as a translation and interpretation of an institutional arrangement with a given logic or rationality. Based on a case study, the paper shows that changing views on accountability support the institutionalisation processes, constituting the case company as a market economy actor in which there is a ‘struggle’ between different rationale views (the market economy, social accountability and production-oriented views). The analysis explicates various ways in which these matters relate to the new way of talking about the company and its survival under market economy conditions—a struggle that management accounting must take into account particularly in the way it deals with the consequences of individual action.     

Researching accounting in health care: considering the nature of academic contribution

As academics we naturally seek to address interesting and important questions. Our concerns for rigour drive us to work from generally accessible preoccupations towards more narrowly and precisely defined questions however. Such specialisation is properly understood as a source of strength in our knowledge. The growing impact of governance mechanisms surrounding journal rankings threatens this strength by attacking our abilities to produce, but also to integrate, the specialised contributions that we make however. This article will expand upon this basic argument and further elaborate it through a discussion of the academic literature around costing in health care.     

Social and environmental accounting,organisational change and management accounting: A processual view

Consistent with calls for in-depth studies of social and environmental accounting and reporting (SEAR) intervention (Bebbington, 2007, Fraser, 2012, Contrafatto, 2012), our paper focuses on the interrelationship between organisational change and SEAR practices, as well as the involvement of management accounting in such organisational dynamics. Drawing insight from both Laughlin (1991) and Burns and Scapens’ (2000) theoretical frameworks, we explore the processes of change through which SEAR practices become elevated to strategising status, in the context of broader organisational and extra-organisational developments, but we also illuminate how institutionalised assumptions of profit-seeking limit the extent to which broader sustainability concerns become infused into day-to-day business practice. Our paper highlights the importance of management accounting in facilitating and shaping the cumulative path of SEAR practices (and sustainability more generally); however, we also heed caution against uncritical reliance upon conventional management accounting tools. The following paper extends our understanding of SEAR practices as cumulative process over time, an awareness of the potential limits to such developments in profit-seeking organisations, and stresses a need to be circumspect when involving management accounting.     

Custom fabric ventures: An instructional resource in job costing for the introductory managerial accounting course

Job costing is a core foundational concept in the introductory managerial accounting course. The purpose of this instructional resource (IR) is to provide a thorough hands-on, active learning resource that will allow introductory students to experience a full set of accounting and management activities necessary to produce a job and assign production costs to it. For example, the IR requires students to analyze overhead costs, determine the optimal job size, schedule production, calculate the amount of materials to purchase, complete material requisitions, update raw materials records, analyze labor time records, complete a job cost record and address critical thinking questions. The IR was developed for use in a “flipped classroom” in which students work under the guidance of the instructor, but could alternatively be assigned as an unsupervised out-of-class assignment or on-line project. Since the IR was specifically developed as a learning tool for novice introductory managerial accounting students, adequate guidance is provided throughout the activity. However, to add realism and challenge students to think beyond the confines of simple mechanics, management and accounting issues are seeded throughout. Student feedback indicates that the IR not only helps students learn how a job costing system operates, but also helps students become aware of management decisions and accounting issues that impact the costs assigned to a job.     

Management accounting and the challenge of strategic focus

The paper presents a case study of management accounting in a company that had been a highly diversified conglomerate but was implementing a new strategy of product market focus combined with a more multinational scope. Formerly subject to a simple but rigorous form of financial control, the new organizational identity of becoming a high-growth, high-technology company posed fresh challenges for its control style and, in particular, for the role of management accounting. The paper draws on self-referential systems theory in order to analyse the paradox that while an organization can become more focused on particular markets and technologies, its management accounting seems to become more diffuse and differentiated. As the company sought to develop a different corporate epistemology through the reproduction of a fresh identity, it established new forms of corporate communication through its quality and performance management systems. Autopoietic theory would acknowledge that management accounting should provide some system guidance but would warn against the possible danger that some forms of performance control may damage company self-production.     

Water management accounting and the wine supply chain: Empirical evidence from Australia

Sustainable water management in the supply chain is critical to the long term viability of wine producing organisations. Yet despite its potential importance as a link to convert good intentions of managers into sustainable water use, thus far knowledge concerning how environmental management accounting can assist is largely non-existent. Drawing on contingency theory and new institutional sociology a telephone survey was used to investigate the current use of water-related environmental management accounting information (here termed water management accounting) for assessing the long term implications associated with water management in Australian wine supply chains. Organisational size, regulatory pressure and corporate environmental strategy were found to be consistent drivers of water management accounting use. However, other drivers of supply chain-oriented water management accounting differ depending on whether the information considered is monetary or physical. Existence of a certified environmental management system and involvement of managers with industry associations are points of difference. These findings indicate a two-step incentive process for implementation is likely to be the most effective for promoting the collection and use of physical and monetary information for environmental management in the wine industry.     

Management accounting change in small technology companies: towards a mathematical model of the technology firm

The primary purpose of this paper is to explain management accounting (MA) change in 93 small Finnish technology firms in terms of their organizational characteristics and motivation patterns. Factor analysis identifies four motivation patterns among the companies. Hence four types of companies emerge called ‘change-oriented’, ‘stable and conservative’, ‘performance-contented’ and ‘discontent resourceless’ organizations. A mathematical model of the technology firm as an adaptive organism with a certain probability to survive, is constructed to obtain expectations for the differences in MA change between the identified types. The model shows that the MA systems (MASs), which help management in large organizations to identify directions for future action (for example, short-term budgeting) may be ineffective in small technology companies. The probability of the company’s survival is sensitive to the intensity of competition and cost efficiency. In an environment where an identified, innovative project cannot be undertaken with certainty, the length of the strategic planning period has a limited optimum level. Moreover, the four types of companies examined have significantly different motivation levels to change their MASs. The change-oriented company must improve its MASs remarkably to compensate for the large negative effect, especially, of high competition, whereas the stable and conservative company has little or no pressure for improvements in its MASs. The performance-contented company has no real motivation to change its MASs because there is no competition. But the discontent resourceless company, which functions in an atmosphere of high competition with shorter customer relationships, is compelled by its environment to adapt its MASs although it has, otherwise, low motivation for change and is acutely resource constrained. These expectations were supported by correlation and regression analyses applied to explore the relationship of the four types to MA change.     

Excel in the accounting curriculum: perceptions from accounting professors

Public accounting firms emphasize the importance of accounting graduates being proficient in Excel. Since many accounting graduates often aspire to work in public accounting, a question arises as to whether there should be an emphasis on Excel in accounting education. The purpose of this paper is to specifically look at this issue by examining accounting faculty's perceptions of Excel in public accounting and accounting education. We survey 245 faculty members at over 100 accounting programs. We find that a majority of faculty incorporate Excel in their accounting classes consistent with their perception of Excel importance. However, we find that students are not fully proficient in Excel based on faculty's perceptions. This study contributes to the accounting education literature by identifying possible disconnections between Excel skills faculty include in the accounting curriculum and specific Excel skills faculty believe new hires (i.e. recent accounting graduates) most often use in public accounting.     

The evolution of management accounting routines in small businesses: a social construction perspective

This paper explores the development of management accounting in small firms through a social construction perspective. Taking Dirsmith’s (1998) (Dirsmith, M. W. 1998. Accounting and control as a solution to technical problems, political exchanges and forms of social discourse: the importance of substantive domain, Behavioural Research in Accounting, 10 (Supplement), 65–77) lead we examine the evolution of control and decision-making processes within four growth-orientated service sector businesses. Key to the perspective is the notion of the owner–manager and his/her employees as creators of management accounting routines that form through a cycle of action, externalization and habitualization. These routines still remain in the control of the originator and are flexible in nature. As the business grows these routines may become objectified into localized management accounting ‘facts’ and they may also be challenged by externally imported accounting conventions. This paper explores the creation of idiosyncratic accounting knowledge and the effects of its transmission over the history of the businesses.     

Sustainability accounting in action: Lights and shadows in the Italian context

This study analyses the use of eight tools for sustainability accounting and the aims of sustainability accounting in decision making. The data, collected through a survey and interviews, indicate that only a small set of experimenter firms use these tools while other firms appear to be more conservative. From a decision making perspective, sustainability accounting is closely associated with the monitoring of internal compliance and efficiency. Unfortunately, sustainability accounting is in a relatively early phase of development and the lack of engagement by most firms is negative for the construction of a more balanced relationship between business and environmental and social issues.     

On the emergence of strategic management accounting: An institutional perspective

Strategic management accounting (SMA) has been presented as an efficacious approach to strategy formulation and implementation. It also suggests accountants move away from purely financial concerns to give consideration to wider business issues. Management accounting change has attracted significant research attention in recent years. This case study explores the issues which surround change and which enable the adoption of SMA and the repositioning of management accountants to become more strategic. The empirical enquiry is based in one company through a prolonged series of interviews and meetings which enabled activities over a number of years to be reviewed. This revealed an increasing strategic role for management accountants in informing strategic decision‐making and how this role came into being. The research is informed by institutional theories and neoinstitutionalism in particular, to interpret the external and internal influences on the change in roles of some management accountants and the outputs of their work.     

Management accounting,performance measurement and strategy in English local authorities

This paper analyses the results of an extensive survey of UK local government which explored the relationship between strategy, management accounting practices (MAPs), and performance measurement techniques (PMTs). The research investigated a resource-based view of strategic capabilities and Porter’s strategic typologies. PMTs and MAPs were shown to be associated with strategic capabilities. Strategic typologies, however, were found to be only weakly associated with the use of PMTs and MAPs.