HI5017: The Case of a Newly Implemented Modern Management Accounting System in a Multinational Manufacturing Company - Management Assignment Help

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Task:

Abstract

Contemporary management accounting techniques (such as TQM, BSC, JIT) are widely lauded by academia but the proposed relevance to business has not necessarily the view held by industry (e.g. Burns & Vaivio, 2001; Chenhall & Langfield-Smith, 1998; Innes et al., 2000. The purpose of this article is to investigate the acquisition by a modern multi-national firm of a major IT-based management accounting program to assess the relevance and usefulness of its functionality by identifying the type(s) of systems that are utilised and the rationale for upgrading or modifying its system(s). This study relies on a single case based on two in-depth semi structured interviews with accounting and finance professionals in a multi-national manufacturing company that recently implemented a modern management accounting system.

The findings indicate that despite demonstrating some relevance of the management accounting information, the manufacturer deactivated components of the system that were deemed irrelevant at particular levels of the organisation. This paper provides evidence about the non-reliance on management accounting information in a multinational company operating in Australia. The findings in the study imply that relevance is linked to implementation, planning and training will help managers to better prepare themselves in setting up contemporary management accounting systems.

Keywords Change, IFRS, institutional, Portugal, principles, rules

Introduction

Contemporary management accounting techniques such as Activity Based Costing (ABC), the Balanced Scorecard (BSC), Just in Time (JIT), Value Chain Analysis (VCA), Total Quality Management (TQM) are practices that have gained widespread attention in accounting, particularly since the latter decades of the 20th century (Argyris & Kaplan, 1994; Bromwich, 1999/2000; Bromwich & Bhimani, 1994; Horngren, 1995; Kaplan, 1994; Kaplan & Norton, 1992; Otley, 1983; Scapens et al., 1996). Where management accounting information has not kept pace with uncertain environments, the relevance of management accounting has been increasingly questioned by business unit managers (Murphy et al., 1995; Kaplan, 1986). The determination of academic research to maintain the relevance of management accounting is a noble pursuit but it is undermined by the choices made in industry and the lack of a pure definition for its achievement and worth (Bromwich & Bhimani, 1994). With a myriad of conventional management accounting systems and the ability to modify or specify alterations, the type and provision of contemporary management accounting systems is an important decision for many firms. The selection of an inappropriate system may result in a detrimental effect on the strategic or operational functioning and positioning of the firm (Burns & Vaivio, 2001; Coad, 1999; Langfield-Smith et al., 2000; Mintzberg, 1990; Mintzberg et al., 1998; MacDonald & Richardson, 2002). Whilst the benefits of contemporary management accounting techniques are evident, successful implementation remains an important and unresolved issue that constrains the benefits derived from new management accounting technologies. This occurs in part because of the contention that management accounting has not developed its own persona and remains merely a tool, rather than an essential component of the decision making process (Loft, 1995; Granlund & Lukka, 1998). Industry challenges of the ilk of globalised competition and fluctuating macro-economic conditions may be the saviour of management accounting as industry seeks to find any advantage, no matter how insignificant (Langfield-Smith et al., 2000). Until the worth of management accounting can be categorically demonstrated, its value may not live up to its potential.

Management Accounting Change

The prominence of modern management accounting emerged in the latter part of the 20th century with the promise of radical changes in management accounting techniques (Burns & Vaivio, 2001; Foster & Young, 1997). No longer was management accounting seemingly conjoined to cost accounting, as techniques such as TQM, JIT and ABC became popular adoption in industry (Bromwich & Bhimani, 1994). The motivations for the adoption of management accounting change generally fall into two broad categories, strategic or long-term change (Hubbard, 2000; Morgan, 1993) and operational or short-term change (Morgan, 1993). A firm may seek to address change by utilising both or either of these approaches but the implementation of a contemporary management accounting technique is generally considered strategic (Morgan, 1993; Bromwich, 1999/2000; Simons, 1990; Chenhall & Langfield-Smith, 1998, 1999; Langfield-Smith, 1997). Chenhall and Langfield-Smith (1999) outline four key steps for strategic management accounting system change that begins with “triggers for adoption” (p. 39). This step pertains to the key factors that management determine as paramount for the decision to move to a new management accounting system. The second part of the process relates to the “System Characteristics”. This step outlines the type of management accounting characteristics management decides are paramount to the transition. “Implementation Issues”, the third part of the change process, follows with a focus on specific issues that will hinder or assist the implementation of a new management accounting system. The final part refers to “outcomes” that relates directly to the results of the implementation

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