Traditional Accounting Methods Research Articles

Productivity assessment of Angola's oil blocks

This paper analyzes the change in productivity as a result of Angola oil policy from 2001 to 2007. Angola oil blocks are the main source of tax receipts and, therefore, strategically important for public finances. A Malmquist index with the input technological bias is applied to measure productivity change. Oil blocks on average became both more efficient and experienced technological progress. Our results indicate that the traditional growth accounting method, which assumes Hicks neutral technological change, is not appropriate for analyzing changes in productivity for Angola oil blocks. Policy implications are derived.

Productivity growth and biased technological change: Credit banks in Japan

This paper investigates the productivity change of Japanese credit banks with a Malmquist index and the input technological bias during 2000–2006. Our results indicate that the traditional growth accounting method, which assumes Hicks neutral technological change, is not appropriate for analyzing changes in productivity. Our analysis unambiguously shows that management of Shinkin banks has to be improved. These must be based on the improvement of technical efficiency and/or technological change, emulating the procedures of the best-practice banks, i.e., those banks with Malmquist productivity scores higher than one and simultaneously with technical efficiency and technological change higher than one.

Rule-Based Storage Accounting for Multipurpose Reservoir Systems

The needs for conservation, efficient management, and accounting of water uses intensify as demands increase relative to supplies. Storage accounting, properly performed, can provide a framework to meet these needs and to efficiently and equitably allocate the benefits, costs, and risks of water resource systems. Rule-based storage accounting is one approach that allows actual water uses and reservoir operations to be tracked against prior existing systemwide rules. This approach is especially well suited to sustainable and adaptive management policies that accommodate: (1) updated allocations of storage in multipurpose reservoirs to most beneficial uses; and (2) targeted credits and penalties for water use and reservoir operations to incentivize conservation, prevent cross-subsidization among included purposes, and check unsustainable demands on the system. The writers review and contrast rule-based with traditional storage accounting methods, and provide an example application of the former to a reservoir system operated to meet multiple consumptive and nonconsumptive uses in conjunction with complex instream flow regimes. Rule-based accounting does not facilitate initial or reallocations of water and storage but, by holding both reservoir operators and water users accountable for compliance with established allocations, discloses their efficiency, fairness and sustainability, and consequently serves to guide future adaptive management strategies.

Análise de rentabilidade de uma rede logística: novo método de cálculo

Este artigo apresenta um método de cálculo de rentabilidade econômica de unidades operacionais (UOs) de empresas de transporte de carga fracionada que operam através de uma rede logística com múltiplas UOs. O cálculo da rentabilidade econômica de cada uma destas UOs é um problema complexo. Devido ao intercâmbio de cargas entre UOs, as receitas de uma UO estão interligadas com as receitas de outras UOs. Os métodos tradicionais de contabilização enfrentam dificuldades quando empregados para determinar a rentabilidade econômica de UOs de uma rede logística de UOs interdependentes. O método descrito neste artigo elimina estas dificuldades por meio do conceito de margem de contribuição.

Where is the ethical knowledge in the knowledge economy?

There is a growing discussion of intellectual capital and the knowledge economy more generally within the accounting literature. This literature, however, has focused narrowly on the considerable discrepancy between book and market values and the inability of traditional accounting concepts and methods to deal with the intangible nature of key sources of corporate competitive advantage. This essay contributes to this literature by providing a broadly poststructuralist reading of the emergence of ethical knowledge as a component of intellectual capital, a category of asset that has almost been completely overlooked within the extant accountant literature on the knowledge economy. The paper does three things. Firstly, it draws on a broad review of the accounting literature to explore how intellectual capital is being defined and constructed within that literature. Secondly, it provides a poststructural analysis of the way ethical knowledge emerged within the intellectual capital statements of an early innovator in Intellectual Capital reporting. Finally, the paper tentatively hints towards the moral and civic potential of alternative conceptualisations of ethical knowledge networks at the margins of the knowledge economy and considers some areas for further research in this regard.

Forensic Accounting and Benford's Law [In the Spotlight

In the field of forensic accounting, the use of Benford's Law (BL) is relevant in identifying misrepresented information in corporate financial statement. Such information was used to fraudulently misappropriate company funds, cover up illegal transactions, and evade taxation. The BL is playing an important role in detecting corporate frauds on traditional investigative accounting methods and techniques like manual verification of records. BL has also been used in image processing for the identification of forged currency works of art. Overall, BL-based SP tools hold the promise of better solutions for the identification of financial fraud.

A roadmap for cost engineering in the automotive supplier sector

The advent of global competition has introduced the need for new competitive manufacturing strategies. The implementation of new strategies has a dramatic effect on measuring product cost compared to traditional management accounting methods. It is found that new cost management methods are required to measure success and support decision-making within the new strategies. One example is the consequences of using traditional management accounting methods for measuring the effects of lean having catastrophic results during reporting. Such results steer managers away from lean manufacture based upon a false picture of the potential benefits. This research examines cost management methods potentially applicable within the automotive supplier sector. Because of the lack of cost-related data collected within the supplier sector companies, this paper ends with a demonstration of a novel method for use in data scarce environments.

Cost Allocation Accounting Methods Used in the Croatian Production Sector

Before conducting the research, two main hypotheses were proposed:H1: The majority of Croatian production companies use traditional accounting methods for cost allocation.H2: Direct production costs make up the largest portion within the production cost structure for the majority of Croatian production companies. Because of this production cost structure, modern cost allocation accounting methods would not contribute to more reliable company profitability evaluation and business decision-making.The research is based on a specific sample including every important Croatian public production company. The process of cost allocation process is not easy. It is a difficult and complicated procedure that requires the application of appropriate accounting methods. The process of allocating costs to cost objects is realized through the application of certain accounting methods. These accounting methods often cannot provide fair and objective cost allocation because they have arbitrary bases that are not always appropriate.

A COST ESTIMATION SYSTEM FOR MANUFACTURING PRODUCT USING ONTOLOGY AND EXEPERT SYSTEM

The capability to estimate accurately the internal costs of a product in the different stages of the development as well as external cost at the quote step is of a strategic importance to a company. The traditional accounting methods as well as the estimation tools have shown their limits to provide a stringent unified tool in both the accounting and the technical sides. A Method of estimation based on the Cost Entity was born recently in order to overcome the loopholes of the usual methods. This method allows from a more or less complete description of the product to link the manufacturing processes (Manufacturing Entities) with the consumption of the associated resources (Cost Entities). The highly cognitive character of such an approach suits the use of a knowledge formalization tool, like ontology. In fact, besides being a simple referencing tool for objects and concepts, the ontologies will allow to capitalize, formalize and structure the concrete knowledge (product description, process…) as well as the abstract one (calculus process, expert rules…) which are both required for cost estimations. The treatment of this knowledge to obtain cost estimation will be done by an independent expert system.

RANKING STOCKS USING THE FUZZY MULTIPLE CRITERIA DECISION MAKING APPROACH

This work applies the Fuzzy Multiple Criteria Decision Making (FMCDM) approach to assist in making stock investment decisions. The proposed approach applies to quantitative data and can accommodate qualitative information which is normally difficult to be integrated by traditional finance and accounting methods. A major-sub-criteria hierarchy is established to reduce the possibility of over-weighing some dependent criteria existing in a single-level structure. The ratings of stocks versus qualitative sub-criteria and the weights of major and sub-criteria are assessed in linguistic terms represented by fuzzy numbers. Each sub-criterion is in a benefit, cost, or balanced nature. New standardization methods for cost-nature and balanced-nature criteria are presented. The algorithms of membership functions of the final aggregation are derived from the roots of cubic equations of multiplications of triple fuzzy numbers. Since these algorithms are clearly developed, the investor can easily calculate the fuzzy aggregation values. The defuzzified final aggregation judges the performance of alternative stocks. Moreover, the ratio of the market price to performance (PP) is suggested to filter the over and under-pricing of alternative stocks. A set of buying and selling rules are recommended based on the performance and PP ratio. Finally, an empirical example of evaluating a set of TSE-listed stocks tests the proposed approach.

Design and implementation of an activity‐based costing system in a pharmaceutical drug discovery environment

AbstractResearch and Development investments in the pharmaceutical industry are continuously increasing, resulting in mounting pressure to improve efficiency in terms of output versus cost. Overall, traditional cost accounting methods do not improve effectiveness of pharmaceutical development activities. In drug discovery, cost control is often not based on any objectively measured data. This study describes the design and implementation of an activity‐based costing (ABC) system related to drug discovery activities in a large pharmaceutical company. Both the theoretical model adapted to the specifics of drug discovery as well as the outcome of the data collection during one quarter are described. The methodological approach is based on a two‐step allocation process: allocation of resource costs to the actual processes (activities) using these costs based on resource drivers, and allocation of activity costs to the cost objects (projects) based on activity drivers. Activity‐based management (ABM) has been applied to the collected data. ABM refers to the entire set of actions and decisions that can be taken with activity‐based cost information. Major and unexpected cost differences per project were observed. Causes for these cost differences are project stage, project type, activity type, complexity of the project, number of employees involved, and type of molecular target. The cause analysis on cost differences guides management decisions such as strategic project portfolio management based on project cost, benchmarking, identifying value‐adding versus non‐value‐adding activities, outsourcing, and budgeting decisions. In conclusion, the ABC methodology secures cost and time reductions, guides project prioritization decisions, and improves cost effectiveness. Drug Dev. Res. 67:107–118, 2006. © 2006 Wiley‐Liss, Inc.

Development of a Practical Costing Method for Hospitals

To realize an effective cost control, a practical and accurate cost accounting system is indispensable in hospitals. In traditional cost accounting systems, the volume-based costing (VBC) is the most popular cost accounting method. In this method, the indirect costs are allocated to each cost object (services or units of a hospital) using a single indicator named a cost driver (e.g., Labor hours, revenues or the number of patients). However, this method often results in rough and inaccurate results. The activity based costing (ABC) method introduced in the mid 1990s can prove more accurate results. With the ABC method, all events or transactions that cause costs are recognized as "activities", and a specific cost driver is prepared for each activity. Finally, the costs of activities are allocated to cost objects by the corresponding cost driver. However, it is much more complex and costly than other traditional cost accounting methods because the data collection for cost drivers is not always easy. In this study, we developed a simplified ABC (S-ABC) costing method to reduce the workload of ABC costing by reducing the number of cost drivers used in the ABC method. Using the S-ABC method, we estimated the cost of the laboratory tests, and as a result, similarly accurate results were obtained with the ABC method (largest difference was 2.64%). Simultaneously, this new method reduces the seven cost drivers used in the ABC method to four. Moreover, we performed an evaluation using other sample data from physiological laboratory department to certify the effectiveness of this new method. In conclusion, the S-ABC method provides two advantages in comparison to the VBC and ABC methods: (1) it can obtain accurate results, and (2) it is simpler to perform. Once we reduce the number of cost drivers by applying the proposed S-ABC method to the data for the ABC method, we can easily perform the cost accounting using few cost drivers after the second round of costing.

Valuation and reporting of intangibles ? state of the art in 2004

For 500 years, companies have been obliged to report their operations and success, or lack of it, to their stakeholders. Traditionally, this function has been performed by conventional accounting methods. However the recent corporate collapses have shown us that traditional financial accounting methods do not always work. Indeed, there has been a growing demand in the last decade for organisations to report on the intangible resources they deploy in their operations to give a more balanced view of their output. The objective of this paper is to look at how intangible resources maybe measured, valued, and disclosed meaningfully to organisational stakeholders in an effort to secure sustainable advantage over competitors or levels of performance that exceed social and economic budgetary expectation.

Demonstrating knowledge value: a broader perspective on metrics

This paper focuses on current efforts to demonstrate the value of knowledge in organisations with reference to activities and systems for the measurement of intangibles. These efforts stem largely from widespread dissatisfaction with the manner in which traditional accounting methods treat intangibles. The wider context is that of national and international governments and organisations striving to master the drivers of knowledge‐based change by involvement in research projects, in conferences, in attempts to find new means of representing intangibles in standard industrial classifications and national accounts and in standards setting for knowledge management. Organisationally this is manifest in proprietary systems for measuring intangibles, many of which suffer the handicap of being overly‐focused on single organisations, with the metrics process continuing to lack critical mass. Although such efforts are necessary and will continue, they are most likely to succeed where they relate to mainstream business activities and operate not so much as metrics as indicators.

Strategic Groups, Frontier Benchmarking and Performance Differences: Evidence from the UK Retail Grocery Industry*

ABSTRACT In this paper we seek to advance the theory and practice of strategic group theory by means of powerful benchmarking tools that allow the composition of strategic groups on the basis of empirically derived production function frontiers. The relative performance of firms is assessed based on multiple inputs and outputs and as a result, firms are associated with different segments of the efficient frontiers. These segments constitute strategic facets and are used in the current paper as strategic group variables. The strategic facets are composed by outlier firms in the sense that they satisfy the Pareto dominance criterion when compared with other firms. Such advancement offers significant advantages compared to the ‘average’ firm that is used traditionally as a basis to define strategic groups. The proposed methodology for the formation of strategic groups has been applied on a panel of data from the grocery industry in the UK in the period 1987–93. The results of the study confirmed the existence of three stable strategic groups and one with a more volatile membership. Performance differences were also identifiled both between and within strategic groups using as criteria traditional accounting methods and also the relative efficiency indices obtained from the benchmarking methodology applied to the panel of data.

Computerization in France: An Evaluation Based on Individual Company Data

In this article we evaluate the contribution of information and communication technologies (ICT) to the growth of value added during the past 15 years in France. Following North American studies, we use traditional growth accounting methods to assess the relative size of two types of contribution: on the one hand the effect of the use of information technologies (IT) on growth due to the accumulation of IT capital taking place within all industries; on the other hand the contribution of the production of ICT to growth due to the strong total factor productivity (TFP) gains achieved in the industries producing ICT. We use individual company data aggregated by industry, which provide us with a measure of the firm's computer stock and makes a detailed investigation possible.

Valuing Technology Companies: Weaknesses of Traditional Accounting Methods and Strengths of Real Option Applications

Traditional accounting procedures, such as generally accepted accounting principles in the United States, do not adequately capture the valuation issues of companies. Wide-ranging suggestions have been made to allow current accounting practices to incorporate the New Economy characteristics of uncertainty and flexibility, and one of the possible remedies is to use real option analysis.

Minimum instructional and program-specific administrative costs of educating residents in internal medicine.

The cost associated with education of residents is of interest from an educational as well as a political perspective. Most studies report a single institution's actual incurred costs, based on traditional cost accounting methods. We quantified the minimum instructional and program-specific administrative costs for residency training in internal medicine. Using the Accreditation Council for Graduate Medical Education program requirements for internal medicine as minimum standards for teaching and administrative effort, we quantified the minimum instructional and administrative costs for sponsorship of an accredited residency program in internal medicine. We also analyzed the impact of resident complement and program curricular emphasis (outpatient, inpatient, or traditional) on the per-resident cost. The main outcome measure was the minimum annual per-resident cost of instruction and program-specific administration. Using the assumptions in this model, we estimated the annual cost per resident of implementing the program requirements to be $50,648, $35,477, $28,517, and $26,197 for inpatient intensive residency programs with resident complements of 21, 42, 84, and 126, respectively. For outpatient intensive residency programs of identical resident complements, we estimated the annual per-resident cost to be $58,025, $42,853, $35,894, and $33,574 for similar resident complements. Fixed costs mandated by the program requirements, which did not vary across program size or configuration, were estimated to be $640,737. There are fixed and variable costs associated with sponsorship of accredited internal medicine residency programs. The minimum cost per resident of education and departmental administration varies inversely with program size within the sizes examined.

The use of a resource-based relative value scale (RBRVS) to determine practice expense costs: a novel technique of practice management for the vascular surgeon.

Vascular surgeons have had to contend with rising costs while their reimbursements have undergone steady reductions. The use of newer accounting techniques can help vascular surgeons better manage their practices, plan for future expansion, and control costs. This article reviews traditional accounting methods, together with activity-based costing (ABC) principles that have been used in the past for practice expense analysis. The main focus is on a new technique-resource-based costing (RBC)-which uses the widely available Resource-Based Relative Value Scale (RBRVS) as its basis. The RBC technique promises easier implementation as well as more flexibility in determining true costs of performing various procedures, as opposed to more traditional accounting methods. It is hoped that RBC will assist vascular surgeons in coping with decreasing reimbursement.

The Costs of Work-Related Musculoskeletal Disorders in Automotive Manufacturing

Inadequate application of ergonomic principles to the design of workplaces and individual jobs has adverse consequences for worker health and safety, especially in terms of strains, sprains, and other musculoskeletal disorders. In addition to the human pain and suffering, other losses are externalized to workers, with adverse financial and psychosocial impacts. There are also costs to employers through workers' compensation claims, scrap, and decreased production quality, medical insurance premiums, labor turnover, and adverse impacts on labor relations, although many of these are not linked by traditional accounting methods to ergonomic problems per se. Data collected in five plants of two major U.S. automotive manufacturing companies in the last decade have been used to estimate some of the costs associated with work-related musculoskeletal disorders (MSDs), only some of which resulted in workers compensation claims. In one plant in 1984-85, the payroll cost of all back and shoulder disorders was at least $320 per year per worker, not including workers' compensation premiums or claims paid. A large proportion of these costs were accrued by "unreported" cases, that is, cases that either had never been reported to the plant clinic or had been reported in the past and were considered administratively to have recovered. In the other four plants, annual costs associated with in-plant medical visits for MSDs in 1989-93 were almost as high as those resulting from compensation claims. At least one-half of these disorders were estimated to be attributable to physical ergonomic exposures in the workplace and thus preventable. These data are consistent with estimates by others that the real costs to employers are at least two to three times the amount paid in workers' compensation cases, and that at least 50 percent of all work-related musculoskeletal disorders among the working population could be prevented by appropriate ergonomic job design. Furthermore, recent experience with ergonomics programs in various manufacturing and service settings shows that they are cost-effective in reducing morbidity, work absenteeism, and workers' compensation claims; payback periods for workplace modifications can be as short as a few months. Further investigations should explore the reasons that monetary costs and other impacts on profitability do not always motivate employers to improve working conditions.