Introduction
A recent research on management accounting culture change established how accounting practices are woven into the cultural fabric of any organization. The study adopted and explored theories of a series of cultural change interventions related to management accounting. The traditional accounting methods involved process costing, standard costing and job-order costing. The evolution of business environment was considered efficient because of its role in the accounting techniques. The new methods labeled as advanced management techniques were considered to provide tools of achieving a competitive edge. They include Kaizen costing, activity-based costing, value-added accounting, cost of quality, strategic management accounting and back-flush costing. The report illustrates how new management accounting techniques provide opportunities for innovative management accounting research. It provides a fruitful emergence of accounting knowledge and the advanced emerging practice issues.
Background information
Management accounting in western economies over the past decade has come under attack, from consultants and leading academics, for failing to serve emerging needs of business in a rapidly changing global economy. The challenge formed part of a wider re-evaluation of received management insight that is prompted by the intensified competition. In particular the case of Pacific Rim and Japanese companies unexpected success in penetrating major western markets. Drucker (1990) a known leading management guru criticizes conventional management accounting system for being focused on the realities of 1920s. Similarly, two-pronged attacks on the established form of the sphere of management accounting has been encountered.Johnson and Kaplan, (1987) maintained that most American enterprise managers focused on cost management until the 1920s. The two critics contend that MAS had developed disciplines needed to run a very successful business. The change in information and manufacturing technology had a resultant effect on the Manufacturing Accounting System (MAS). According their arguments, the change got exacerbated by the increased intensity of local competition, collapse of protective barriers to entry in the face of global competition pressure and deregulation of public utilities
The second attack by (Johnson 1994 asserts management accounting systems has never been relevant in the proper running of any business organization. Johnson criticizes MAS for failing to contribute to the overall managing process and rather strive to manage the results. Johnson’s solution however is a total replacement of the use of MAS with total quality management (TQM) for decision-making purpose.
The appeal by Kaplan (1984), Johnson (1987) and Ducker (1990), provided the ground for many researchers to investigate the extent management accounting practices were evolving. These practices were in response to changes in information technology and work. The investigations surveyed current management accounting practices and tried to identify which of the practices had innovations similar to those prompted by the gurus. These methods include zero defect policies, zero-inventory, target costing, back-flush accounting and activity-based costing.
This line of research, however, provides many insights into the extent to which contemporary management accounting practices correspond to the proposed accounting practices by the gurus. Lack of evolution in accounting practices is portrayed as not only detrimental to business interest, but threatens the corporate survival as well (Rvenpaa, 2007).
Organizational Changes
New set of challenges set on company management has of late emerged. The roles and designs of accounting tools like budgeting system appear to be changing. Instruments for management like Accounting information system have also developed (Kuhlmann, 2010).
Budgetary changes
Budgeting is an important aspect of the management control system that promotes coordination and communication within the subunits, within the company. However, it has been criticized for creating centralized decision-making, too time consuming, imposing a vertical command-and-control structure, focusing on cost reduction instead of value creation and stifling initiative.
However, proponents of an alternative management control system point out that over relying on budget has consequences. Failure to create a high - performance climate based on competitive success because of a fixed target and failure to make accountability for a satisfied customer since financial measures dominate. These two critiques against the budget are relevant particularly for an organization in a rapidly changing environment. These critiques have however led to the emergence of alternative ways of budgeting such as activity-based budgeting (Hansen et al., 2003). New forms of planning devices have also been deployed such as the ‘Beyond Budgeting Principles'. The new device activities are similar to budgeting activities such as forecasting, resource allocation and target setting. However, no budget is allocated in advance, and the process separated in time. The Table 1 below illustrates the main difference between budget and beyond budgeting.
In the modern analysis of budgetary data, two theoretical perspectives have been put forward. They include the resource dependency perspective and the agency theoretical perspective.The Agency theory is applied to help explain and understand the relationship and need for control between different levels within an organization. The theory brings out the understanding of the traditional relationship between an agent and a principal (Jensen and Meckling, 1976). It illustrates that the relationship of an organization exists when one or more individual (principal) hire another (agent) to perform services on their behalf. Budgets are the commonly used technique of handling the principal - agency threat of moral hazards and challenges. The resource dependency perspective directs attention to informal dimensions such as interactions and perceived dependencies.
Accounting Information system changes
Awareness of the importance and necessity of information in ensuring the survival knowledge and performance of organizations has emerged because of the challenges set by the company's management. The bottlenecks in reverberating operation created by organizations development have produced a review of their financial information systems and generated new terms. These terms include knowledge transfers, knowledge sharing, knowledge organizations and knowledge management. Global continuous development of companies and industries have determined rise in information complexity. These alterations prompted the urge for innovating an information system that is easily adapted to knowledge organizations. The system provided answers to the hard questions concerning the need for information manifesting itself within the organizations. The systems ascertain the actual status of the organization, opportunities and risk relevant to the learning organization policy. The innovated system main purpose is creating a direct and on time bi-directional statements within the two systems (Kuhlmann, 2010).
Analysis of the qualitative or quantitative data
According to recent research, it indicated that digitization of the cultural practices influences the continued reliance on traditional management system. The report shows variable costing usage at 76% and absorption costing at 80%. In relation to accounting cultures, the Tortellini x-erience portrays the level at which changes in technology have affected the accounting process. Basing upon the computing platforms a relative higher adoption rates were reported for the popular activity-based costing, accounting and management. The development of new systems resulted in a slight shift to new approaches of accounting. The reliance on traditional methods compared to new techniques has been reported to be at a low rate. In contrast to traditional practices, the degradation and digitalization have facilitated the a smooth and easy trace and commenting on the ephemeral changes. It thus exhibits that there is relatively little reliance on advanced techniques as compared to the traditional practices. In an accounting context, it indicates that standard costing remains the main single management accounting technique. The use of traditional methods still exists with high standard costing and a low full costing. However, management accountants reported the highest usage of advanced management techniques, especially through the incorporation of Span and Tortellino X-perience.
Discussion
In an accounting context, Beyond budgeting, is among the advanced technologies or mechanisms that have emerged to tackle the weaknesses of the budgetary process. According to the traditional culture, the approach focuses towards the budget goals, but due to the new techniques in accounting it focuses more on being the best on the ranking list. Others create the different divisions in order to create the competitive feeling. The benchmark for comparison is meant to create both transparency and trigger competition.
Understanding the ways in which people evolve and process information is One important aspect of the decision-making process. An additional factor to be considered is the possibility of coming up with decision-making patterns. These models must take into account the current changes in information. The new system and innovation development directly address new cultural artifacts. Furthermore, the new system addresses new organizational action patterns.
Conclusion
The study portrays how those working as a management accountant considers their role as changing one. Emphasis focuses on decision-making and strategy roles rather than the usual traditional areas of financial analysis and costing. One traditional area high on the management accounting list is budgeting. However, the various contemporary techniques invented in response to changing requirements has not been documented. The Balanced scorecard, Economic value added, Benchmarking and activity based costing were all cited as traditional techniques and unlikely being used in the current system. Management accountants need skills in creativity, communication, analysis and adaptability. This report gives an insight into the various questions -about the new management accountant techniques that have emerged. Budget and Account information systems are some of the two areas highlighted as affected by these changes.
References
Olga, P. (2005). AIS (Accounting Information System) - Power Instrument for Advanced Management in Knowledge Based Organizations. In Management-Marketing (Vol. 1, pp. 1-7).
Rvenpaa, M. J. (2007). A Case Study on how Management Accounting Culture was Changed. Making Business Partners, 16 (1), 99-142.
Rosner, D., Roccetti, M., & Marfia, G. (2014). The Digitization Of Cultural Practices. Contributed Articles, 1(1), 1-7.
Ostergren, K., & Stensaker, I. (2011). A Field Study of ˜Beyond Budgetingâ in Practice. New management accounting techniques, 20 (1), 149–181.
