Innovating cost accounting practices in rail transport companies

Abstract

Purpose – The purpose of this paper is to present and discuss an accounting innovation in the cost measurement system of rail transport companies. Design/methodology/approach – The authors identify the distinctive features that cost accounting systems should have in order to capture the particular structure of the production process of rail transport companies and develop an innovative accounting practice that addresses the specific features of railway services, particularly the high fixed costs associated with the infrastructure. This accounting innovation is applied to Trentino Trasporti, a medium-sized, privately owned passenger railway company operating in the Trentino Alto Adige region of Italy. Findings – Evidence suggests that the new accounting practice facilitates the operational connection between the company's resources and their consumption during the provision of transport services. Practical implications – This connection enables companies to identify new opportunities for improvement and cost optimisation by finding the real origins of cost consumption in the provision of rail transport services. Originality/value – The case analysed also shows the necessity of integrating activity-based costing (ABC) with an accounting innovation that can represent the resources consumed by the various elements of the infrastructure that support the provision of services. This innovation has important managerial outcomes for all service companies that operate with an infrastructure network, including transport, service, and utility companies, and useful implications for the accounting profession that deals with cost systems in networked-based companies.