Comparative Management Accounting E-Book

René Stienemann

• Herausgeber: GRIN Verlag
• Sprache: Englisch

Veröffentlichungsjahr: 2008

Beschreibung

Diploma Thesis from the year 2006 in the subject Business economics - Controlling, grade: 1,7, University of Münster, language: English, abstract: The competitive environment for companies is steadily becoming more challenging and demanding. Large planned company take-overs as recently announced from multinational corporations like for instance MITTAL STEEL or E.ON AG indicate the demand for more sophisticated and advanced management accounting information in order to react properly on the external market pressures worldwide. Multinational companies regularly have to cope with different institutional environments, management practices, techniques as well as cultural understandings between the respective countries. While in this context the field of financial accounting has already attracted much attention from the academic world on a comparative nationwide level, the area of internal management accounting has largely been a concern of approaches focussing on single countries only. These approaches have been analysed by national academic scholars and as a consequence also influenced the practices in other countries. However, in order to initiate a discussion and to highlight best practices, novelties and inefficiencies in the management accounting world, a sophisticated comparison drawing on the differences and similarities in the observed countries has only recently been conducted in the management accounting literature. Furthermore, different labels, in different languages, are used to refer to management accounting around the world. The relatively young discipline of comparative management accounting tries to fill this gap in management accounting research by determining the degree of diffusion of applied concepts and practices in different countries. The present paper analyses the different characteristics of management accounting in Germany, the United Kingdom (U.K.) and the United States of America (U.S.). The paper is organized as follows. Chapter 1.2 explains the choice of the selected countries and the methodological proceeding. Afterwards, chapter 2 introduces the general concept of comparative management accounting and reviews the current academic literature. Based on the terminological specification of nationwide diverging definitions of management accounting labels, the following chapter 3 describes and compares the main aspects and characteristics of management accounting in Germany, the U.S. and the U.K. Chapter 4 discusses current developments in management accounting. Finally, the concluding chapter 5 summarizes the findings.

Leseprobe

Table of Content

List of abbreviations

1 Introduction.

1.1 Motivation and goals of this study

1.2 Methodological explanation

2 Principles of comparative management accounting

2.1 Comparative management accounting.

2.2 Management accounting versus controlling

2.2.1 Management accounting terminology and definitions in the .US. and the .UK.

2.2.2 Management accounting terminology and definitions in Germany

2.3 Determinants and factors of influence for differences in management

2.3.1 Culture as influence factor in management accounting

2.3.2 Education, occupation and institutions of management accountants as influencing

2.3.3 Economic background as influence factor.

2.3.4 Other potential determinants and factors of influence.

2.3.5 Concluding remarks concerning divergence versus convergence of management

2.4 Literature review

3 Comparison of relevant management accounting aspects

3.1 Tasks and objectives of management accounting

3.1.1 Objectives and target groups of management accounting

3.1.2 Long-term versus short-term goals.

3.1.3 Management accounting versus financial accounting.

3.1.4 Fields of activity for management accountants

3.1.5 Tasks of management accountants.

3.2 Management accounting systems and instruments

3.2.1 General ledger versus two circle system.

3.2.2 Management accounting instruments.

3.3 Organisational integration of management accountants in the corporation

3.3.1 Hierarchical level of management accountants within the corporation

3.3.2 Interrelations and connections to adjacent departments.

3.3.2.1 Organisational connection to the finance department

3.3.2.2 Organisational connection to the cost accounting department

3.3.2.3 Regional separation of financial and management accounting departments.

3.3.3 Size of management accounting departments

3.4 Role of the Controller in the observed countries

3.4.1 Role of management accountants in Germany

4 Current developments in international management accounting.

4.1 Approach of management accounting and financial accounting in Germany

4.2 German influence on Anglo-Saxon management accounting

5 Conclusion

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Appendices

Appendix A: Sophistication of occupational institutions for management accountants ............XVI Appendix B: Convergence versus divergence in management accounting.............................XVII

Appendix C: Literature review ...................................................................................................XIX Appendix D: Long-term versus short-term orientation in management accounting.............. XXXV

Appendix E: FEI-Catalogue................................................................................................. XXXVII Appendix F: Mission Statement IGC .................................................................................. XXXVIII Appendix G: Mission Statement KAARMANN GMBH .............................................................. XXXIX Appendix H: Summary of the findings in the paper.................................................................... XL

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List of abbreviations

ABC Activity Based Costing CAO Chief Accounting Officer CFO Chief Financial Officer CIMA Chartered Institute of Management Accountants G Germany GAAP Generally Accepted Accounting Principles HGB Handelsgesetzbuch IFRS International Financial Reporting Standards IMA Institute of Management Accountants MBO Management Buy Out ROE Return On Equity ROI Return On Investment U.K. United Kingdom U.S. United States

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Introduction

1 Introduction

1.1 Motivation and goals of this study

The competitive environment for companies is steadily becoming more challenging and demanding. Large planned company take-overs as recently announced from multinational corporations like for instance MITTAL STEEL or E.ON AG indicate the demand for more sophisticated and advanced management accounting information in order to react properly on the external market pressures worldwide. Multinational companies regularly have to cope with different institutional environments, management practices, techniques as well as cultural understandings between the respective countries. While in this context the field of financial accounting has already attracted much attention from the academic world on a comparative nationwide level, the area of internal management accounting has largely been a concern of approaches focussing on single countries only. These approaches have been analysed by national academic scholars and as a consequence also influenced the practices in other countries. However, in order to initiate a discussion and to highlight best practices, novelties and inefficiencies in the management accounting world, a sophisticated comparison drawing on the differences and similarities in the observed countries has only recently been conducted in the management accounting literature.

Furthermore, “different labels, in different languages, are used to refer to management accounting around the world” (IFAC 1998, page 84). The relatively young discipline of comparative management accounting tries to fill this gap in management accounting research by determining the degree of diffusion of applied concepts and practices in different countries. Divergences should be analysed to learn from the respective other language area and to understand the used approach.

The present paper analyses the different characteristics of management accounting in Germany, the United Kingdom (U.K.) and the United States of America (U.S.). The intention of this paper is to highlight the differences in management accounting between the observed countries as well as its effects. Additionally, it should be analysed whether a convergence or divergence of

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Introduction

management accounting practices and techniques can be observed and whether current developments in management accounting will influence future practices.

The paper is organized as follows. Chapter 1.2 explains the choice of the selected countries and the methodological proceeding. Afterwards, chapter 2 introduces the general concept of comparative management accounting and reviews the current academic literature. Based on the terminological specification of nationwide diverging definitions of management accounting labels, the following chapter 3 describes and compares the main aspects and characteristics of management accounting in Germany, the U.S. and the U.K. Chapter 4 discusses current developments in management accounting. Finally, the concluding chapter 5 summarizes the findings. The organization of the paper is illustrated in the following figure 1:

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Introduction

1.2 Methodological explanation

The present study concentrates on the countries Germany, the U.K. and the U.S. These countries are selected due to various important factors. At first, the U.S. is still the leading country in the world with respect to economic power and management accounting importance. Many countries have been and still are influenced by new developments in U.S. management accounting (SHERIDAN 1995, page 293). Therefore an involvement of the U.S. is considered to be mandatory in this comparative study. Furthermore, the U.S., but also the U.K., continuously influences management accounting developments in other countries because of English as the dominant language in the world of business (ADLER 1991, page 13; PISTONI & ZONI 2000, p. 311). In addition management accounting is often claimed to have its roots in the U.S. and has influenced the accounting practices and development in German management accounting (Otto 2000, page 25).

Secondly, Germany and the U.K., though being seemingly different regarding management accounting structures and institutions1, are among the dominant European countries in Europe with respect to management accounting importance (BLAKE, AMAT & WRAITH 2000, page 123). In this context, many studies have shown a significant impact of German management accounting on several other countries in the world.2

As the U.S. and the U.K. can be assumed to be rather similar due to the same language, similar financial accounting orientation3and the same contextual and cultural proximity (CARR & TOMKINS 1998, page 215f; Hoffjan & WÖMPENER 2005, page 623; HOFSTEDE, 2006), both countries will be treated commonly as ‘Anglo-Saxon’ or ‘Anglophone’ countries if nothing else is stated. In this context, as comparative management accounting is a relatively young discipline, only a few studies dealing with this topic are available so far. Consequently, some topics within the comparative management accounting

1Compare chapter 3.

2German management accounting has been widely adopted and influenced a wide range of

countries outside of Germany, e.g. Austria, Spain, Switzerland, Sweden, Norway, Hungary,

Poland, Czech Republic, Slovenia, (northern) Italy, France, the Netherlands, Namibia and

South Africa (KEYS & MERWE 1999, page 2; BLAKE, AMAT & WRAITH 2000, page 123).

3Compare chapter 3.1.3.

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Introduction

literature are still discussed controversial. In order to give an overview on specific issues in comparative management accounting, statements are developed that mirror the contrasting opinions in the literature. Therefore, in a first step, a framework was developed, aiming at classifying the relevant literature as presented in chapter 2.4. Following these categories, the literature was then identified.

In the next step, statements were generated. The statements are based on the results of a systematic analyse of the relevant management accounting literature in the German and Anglo-Saxon language area. Keeping in mind the possibly varying management accounting concepts, it will be analysed whether the current literature confirms or confutes the respective statements. As the reviewed literature varies significantly concerning the analytical method, the included countries, the time and goal of study and its target groups, the statements do not claim any legalitiy and universal validity. Nevertheless, the results can give first evidence in which cases unanimity among the literature can be observed, and in which cases further research is needed. Finally, conclusions are drawn in the relevant chapters.

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Principles of comparative management accounting

2 Principles of comparative management accounting

2.1 Comparative management accounting

Management accounting is only recently researched and discussed on a comparative and nationwide level (BLAKE, AMAT & WRAITH 2000, page 122). While in the beginnings of internal accounting research the focus was solely on financial accounting matters, a range of authors are now searching for a deeper understanding of management accounting practices and principles in different countries and environments (HOFFJAN & WÖMPENER 2005, page 51).4Comparative management accounting compares management practices and principles between countries and cultures in order to initiate a discussion and to highlight best practices, novelties as well as inefficiencies in the management accounting world. Managers could furthermore achieve competitive advantages by applying innovative management accounting techniques from other countries or cultures (AMAT, BLAKE & OLIVERAS 1999, page 20). Additionally, comparative management accounting aims at a guidance of techniques and practices towards a convergence in the business world (Hoffjan & WÖMPENER 2005, page 51).

2.2 Management accounting versus controlling

Terms like management accounting or controlling are not equally used and understood in all countries (AMAT, BLAKE & OLIVERAS 1999, page 19). In Germany for instance, the label management accountant is not commonly applied as a description of the occupational identity - neither in its English term nor in its German translation (SHERIDAN 1995, page 1; BIRKET 1998, page 487). In order to compare the work of the management accountants in the three countries, equivalences for the corresponding Anglophone meanings have to be found. In this aspect, controlling is regularly viewed as similar to the Anglophone management accounting in the relevant academic literature (SHERIDAN 1995, page 1; OTTO 2000, page 38; WILLSON, BRAGG & ROEHL-

4Comparechapter 2.4 for an overview over the current literature and scholars dealing with

comparative management accounting.