Accounting Innovations Research Articles

Unbundling management accounting innovations

Over the last two decades, there has been a rich supply of management accounting innovations in the literature. The innovations are mainly presented in terms of management accounting models often labelled by acronyms like ABC or SMA. However, different suppliers of the models design them differently and the models are better described as packages of elements. The purpose of this paper is to identify and discuss some of these elements by unbundling a subset of the new models. A generic framework for the analysing elements is developed for this purpose. Influences on design-characteristics, and implications for future research are discussed.

Activity-based costing diffusion across organizations: an exploratory empirical analysis of Finnish firms

This study aims to explain what drives innovation diffusion in management accounting during its various phases. Based on Abrahamson [Abrahamson, E. (1991). Managerial fads and fashions: the diffusion and rejection of innovations. Academy of Management Review, 16, 586–612] , four perspectives with potential to explain the diffusion of accounting innovations are identified: the efficient-choice, forced selection, fad and fashion perspectives. The diffusion of activity-based costing (ABC) in Finland provides an empirical context to study how these four perspectives apply to management accounting innovation. Data comes from a set of four surveys (total n=490, response rate 39.5%, 114 ABC cases), from interviews of consultants, academics and software industry employees, and from archival sources. The study proposes that the driving forces behind innovation diffusion in management accounting change over the course of diffusion. Efficient choice may explain the earliest adoptions, whereas fashion-setting organizations exert considerable influence in the take-off stage. Later on, the influence of fashion setting organizations diminishes. Further diffusion is explained both by mimetic behaviour and efficient-choice.

The Contingency Model of Governmental Accounting Innovations: a discussion

Comparative International Governmental Accounting Research (CIGAR) has been carried out for some twelve years. CIGAR research is, however, generally unfamiliar to researchers not belonging to the CIGAR network. Therefore, the paper aims at presenting and discussing critically CIGAR research with its Contingency Model of Governmental Accounting Innovations and suggests how CIGAR research and its Contingency Model could be developed.

Physician resource utilization in radiation oncology: A model based on management of carcinoma of the prostate

Purpose : To develop a methodology to estimate the comparative cost of physician time in treating patients with localized prostate cancer, using as an example two-dimensional (2D) vs. three-dimensional (3D) conformal irradiation techniques, and to illustrate how current cost-accounting techniques can be used to quantify the cost of physician time and effort of any treatment. Methods and Materials : Activity-based costing, a recent innovation in accounting, widely recommended for estimating and managing the costs of specific activities, was used to derive physician resource utilization costs (actual cost of the physician services and related support services consumed). Results : Patients treated with 3D conformal irradiation consume about 50% more physician time thanpatients receiving 2D conventional radiation therapy. The average professional reimbursement for 3D conformal irradiation is only about 26% more than for the 2D treatment. Substantial variations in cost are found depending on the total available physician working hours. In an academic institution, a physician working 40 hours a week would have to spend an average of about 60% of available time on clinical services to break even on a 2D treatment process and over 74% of available time on clinical work to break even on a 3D treatment process. The same physician working 50 hours a week would have to spend an average of about 48% of available time on 2D clinical sevices and about 60% of available time on 3D clinical work to break even. Current Medicare reimbursement for 3D treatment fall short of actual costs, even if physician work 100% of a 50-hour week. Medicare reimbursement for 2D barely allows the department to break even for 2D treatments. Conclusions : Costs based on estimates of resource use can be substantially under- or overestimated. A consistent language (method) is needed to obtain and describe the costs of radiation therapy. The methodology described here can help practitioners and researchers more accurately interpret actual cost information. Future use of such cost-estimation methodologies could provide consistent and comparable costs for negotiations with health care providers and help assess different treatment strategies.

Customer profitability analysis:

Recent innovations in management accounting have emphasized a customer focus and the requirement of remaining competitive through satisfying customer needs. In so doing they have largely overlooked the dual requirement that customers should satisfy the strategic needs of the supplier. Examines customer profitability analysis (CPA) as a tool for the evaluation of the portfolio of customer profiles, and suggests that activity‐based costing may facilitate the success of CPA implementation.

Industrial innovation and parallel accounting developments

In this paper, we examine parallel accounting developments that have taken place in the late 1980s and early 1990s to complement and support the changing manufacturing environment. As a background to understanding the process of change that has taken place in accounting, we use the industrial innovation model, recognizing that it also has evolved [6]. Material obtained from an ongoing research programme that is aimed at examining the development and deployment of new accounting techniques and practices is presented and discussed. This material suggests that several comparable features of contemporary industrial product innovation are also present in accounting innovation activity. These features include, inter alia, a multidiscipline team involvement and improved dialogue between lead ‘users’ and ‘suppliers’. The improved dialogue can result in useful feedback on new innovation trajectories. The importance of top management support for innovations in accounting cannot be underestimated if the innovations are to be successfully developed, implemented and become ‘good currency’. There is evidence that accounting innovations are taking place in a rich yet complex environment of multi-inputs, increased mutual understanding of all the key players and with extended use of parallel rather sequential processes of development. A particular focus of the paper is the way that ideas associated with activity based costing have been widened and deepened to facilitate business process redesign.

Management accounting and the Calvin Company: a case study

Accounting innovation and change has received the increased attention of accounting historians. Coupled with the recognition of the historical contingency of accounting practices, these studies serve to underscore the contingent relationship of accounting with a variety of environmental factors. The current case study examines this relationship within one nineteenth-century Canadian firm,specifically the introduction of management accounting information. While the results are case specific, parallels with our present-day situation can be drawn. This reinforces the usefulness of examining new accounting developments in light of historical experience in order to envision their possible outcome.

ACCOUNTING INNOVATIONS: THE IMPLICATIONS OF A FIRM'S RESPONSE TO POST CIVIL WAR MARKET DISRUPTIONS

This study addresses the nature of accounting innovations within the context of the Quincy Mining Company's response to the disruption of the domestic copper market following the Civil War. Primary documentation is used to first define the firm's cost management activities, then to define the characteristics of the firm's internal accounting practices that contributed to these activities. It is argued that, although accounting was a participant in the cost control process, it was a paternalistic social structure that provided the impetus for the firm's struggle to remain profitable.

Management accounting (1984-1994): development of new practice and theory

The past 10 years has seen a revolution in management accounting theory and practice. This paper reviews the development of three management accounting innovations: activity-based costing, operational control systems, and the balanced scorecard. It describes how these practice innovations were initially documented, and then elaborated and disseminated through publications. From the experience of this decade of investigation, documentation and theory development, the author advocates empirical research based on close longitudinal association with innovative organizations as one method for advancing management accounting practice and education.

Theory of perpetual management accounting innovation lag in hierarchical organizations

Many researchers claim that management accounting innovations lag technological innovations, thus resulting in outdated management accounting systems that lead to suboptimal decision making. This manuscript examines the causes of management accounting innovation lag in organizations and develops a theory of perpetual accounting lag. Perpetual accounting lag theory is derived from the organizational failure framework and markets and hierarchies theory. The theory asserts that operation of an internal labor market within a hierarchical organization inhibits management accounting innovation.

Management accounting: Are new techniques making in-roads with practitioners?

Abstract Despite numerous criticisms and the examples of specific companies changing to a particular technique, there are few empirical studies providing evidence of the status of management accounting practice. The primary purpose of this study was to examine trends in the adoption of the new managerial accounting techniques by manufacturing firms. Evidence of changes in the direction of managerial accounting would have significant future implication regarding the direction of management accounting education and of accounting theory. The results of this study indicate that new techniques are being adopted while traditional systems are being maintained, suggesting that a broadening of innovations in management accounting may require the development of a new and separate course dealing strictly with these innovative techniques in the transition to world-class manufacturing.

Industrial organization and accounting innovation: charcoal ironmaking in England 1690–1783

Accounting and business historians are showing a growing interest in the origin and development of cost and management accounting. Primary source studies have improved our understanding of past developments, but more original investigation is required in order to produce a sound basis for valid generalizations concerning such matters as: the nature and usefulness of management accounting systems employed by companies in the past; the relative sophistication of British and American systems; and the implications of accounting systems for British economic decline post-1870. In the absence of a sufficient ‘bedrock’ of relevant case studies, we believe that theories and proposed solutions about ‘what has gone wrong with management accounting’, for example, will be constructed on a flimsy base, possibly leading to the development of solutions which are flawed from the outset. The purposes of this paper are, therefore, to add to our knowledge of the development of accounting practice, to explore the nature of accounting change, and to examine the use of accounting systems as the basis for management decision making. The investigation is based on records relating to iron making in the region of Sheffield, England, during the period 1690–1783. The particular accounting practice to which we give attention is the development and use of an integrated system of cost and management accounting as the basis for business decision making.

THE PROCESS OF ACCOUNTING INNOVATION: THE PUBLICATION OF CONSOLIDATED ACCOUNTS IN BRITAIN IN 1910

The first known example of a consolidated balance sheet published by a British company was made available to shareholders of the Pearson and Knowles Coal and Iron Company Ltd. in 1910. This paper examines the reasons for this accounting change and investigates the source of the necessary expertise. The conclusion reached is that, in common with many other accounting innovations, evolutionary change occurred as the result of modifications to an existing business practice.

Accounting innovation beyond the enterprise: Problematizing investment decisions and programming economic growth in the U.K. in the 1960s

It has recently been stated that innovations in management accounting have been the preserve of practitioners, and that these innovations which began in the nineteenth century had more or less halted by 1925 (Johnson, H. T. & Kaplan, R. S., Relevance Lost: The Rise and Fall of Management Accounting (Boston, MA: Harvard Business School Press, 1987)). The most significant exception to this neat model of accounting innovation is held to be the development of discounted cash flow (DCF) procedures as a tool for management in the 1950s. This exception is explained away as an aberration in an otherwise smooth process. It consists, so it is argued, of academics striving for relevance rather than practitioners innovating in the face of practical problems. This paper explores this supposedly aberrant moment of innovation from a different perspective to that of Johnson and Kaplan, and for a particular context. The boundaries of the processes of innovation are drawn differently and more widely, to include various agencies, arguments and mechanisms through which DCF techniques were promoted in the U.K. in the 1960s. The world of the practitioner or the academic is not accorded an a priori explanatory privilege, and the promotion of DCF techniques in the U.K. is interpreted as involving much more than “academics striving for relevance”. Four concepts are suggested as possible ways of posing further questions about the processes of accounting innovation: problematizations, programmes, translation, and action at a distance. The paper seeks to show how concerns about investment decisions within firms came to be posed in terms of a general problematization of economic growth, and how a translatability came to be established between programmes for improving economic growth, and the use of DCF techniques for individual investment decisions. Action at a distance is the term that is used to characterize the possibility of one entity becoming a centre capable of exerting influence over others through such mechanisms. In the context of a political culture which sought economic growth yet wished to avoid direct intervention in the decisions of private enterprise and the nationalized industries, these issues are argued to have attained a particular significance. DCF techniques made it possible for government to seek to act at a distance on the economy without intruding within the private sphere of managerial decisions. Considered together, and for the case of DCF in the U.K. in the 1960s, an examination of these processes is considered to significantly modify the counterposing of practitioners innovating within firms, versus academics striving for relevance. Accounting innovation is argued to occur “beyond the enterprise” as well as within it.

On the interrelations between accounting and the state

A concern with the interrelations between accounting and the state is integral recent studies of accounting change. Yet there has been little explicit attention to ways of thinking about the nature of the linkages themselves, and the concepts that might be used to analyse them. Approaches that rely on an implied exteriority between accounting and the state are argued to neglect these interrelations. The theoretical limitations of “functional” and “external factor” approaches are discussed as a way of highlighting the importance of these issues. A framework is proposed that differs from these models. This focuses on the relays, linkages and interdependecies between the practices and rationales of accounting on the one hand, and the state defined as a loosely assembled complex of rationales and practices of government on the other. The theoretical framework suggested centres on a distinction between two aspects of government. Firstly, the programmatic and abstract field or rationales, statements and claims that sets out the objects and objectives of government, and that is termed “political rationalities”. Secondly, the range of calculations, procedures and tools that materialize and visualize processes and activities, and that is termed “technologies”. Whilst distinct, these two aspects of government are linked in a relationships of reciprocity. The specific rationales that articulate political rationalities allow congruences to be established between the roles of accounting and the objectives of government. The ways of calculating and intervening provided by technologies enable domains to be operated upon and enrolled within programmes of government. This framework is illustrated by reference to innovations in accounting and other practices of government across the “Colbert period” of Louis XIV's reign, 1661–1683. This was a significant period of innovation for private enterprise accounting, and for a range of practices of government. It is through a particular rationale of “order” that these two distinct sets of practices are argued to have been aligned, and roles for accounting articulated. An examination of these issue is considered to demonstrate the importance of examining the interrelations of accounting and the state.

Accounting for the control of doctors: Management information systems in hospitals

The paper describes some current and proposed innovations in the activity accounting and cost accounting systems in two Swedish hospitals. Results are reported of interviews with administrators and senior doctors which reveal their attitudes and intensions with respect to the new control information generated by the accounting innovations. The fundamental differences between the professional ethos of the doctor and the managerial ambitions of the administrator are found to remain robust. Nevertheless there is evidence that the new control information may be the focus of some genuine convergence in the outlook of some administrators and some “doctors managers” with some consequent reduction in goal-uncertainty in the organisation. This paper argues that this calls for some revision of existing accounts of the interaction of doctors and administrators in hospital management.