The Case of a Newly Implemented Modern Management Accounting System in a Multinational Manufacturing Company
Australasian Accounting, Business and Finance
Journal
Volume 8 | Issue 2 Article 9
The Case of a Newly Implemented Modern
Management Accounting System in a
Multinational Manufacturing Company
Daniel Watts
McGrathNicol, Australia
P.W. Senarath Yapa
RMIT University
Steven Dellaportas
RMIT University, XXXXXXXXXX
Follow this and additional works at: http:
o.uow.edu.au/aabfj
Copyright ©2014 Australasian Accounting Business and Finance Journal and Authors.
Research Online is the open access institutional repository for the University of Wollongong. For further information contact the UOW Li
ary:
XXXXXXXXXX
Recommended Citation
Watts, Daniel; Yapa, P.W. Senarath; and Dellaportas, Steven, The Case of a Newly Implemented
Modern Management Accounting System in a Multinational Manufacturing Company, Australasian
Accounting, Business and Finance Journal, 8(2), 2014, XXXXXXXXXXdoi: XXXXXXXXXX/aabfj.v8i2.9
http:
o.uow.edu.au/?utm_source=ro.uow.edu.au%2Faabfj%2Fvol8%2Fiss2%2F9&utm_medium=PDF&utm_campaign=PDFCoverPages
http:
o.uow.edu.au/?utm_source=ro.uow.edu.au%2Faabfj%2Fvol8%2Fiss2%2F9&utm_medium=PDF&utm_campaign=PDFCoverPages
http:
o.uow.edu.au/aabfj?utm_source=ro.uow.edu.au%2Faabfj%2Fvol8%2Fiss2%2F9&utm_medium=PDF&utm_campaign=PDFCoverPages
http:
o.uow.edu.au/aabfj?utm_source=ro.uow.edu.au%2Faabfj%2Fvol8%2Fiss2%2F9&utm_medium=PDF&utm_campaign=PDFCoverPages
http:
o.uow.edu.au/aabfj/vol8?utm_source=ro.uow.edu.au%2Faabfj%2Fvol8%2Fiss2%2F9&utm_medium=PDF&utm_campaign=PDFCoverPages
http:
o.uow.edu.au/aabfj/vol8/iss2?utm_source=ro.uow.edu.au%2Faabfj%2Fvol8%2Fiss2%2F9&utm_medium=PDF&utm_campaign=PDFCoverPages
http:
o.uow.edu.au/aabfj/vol8/iss2/9?utm_source=ro.uow.edu.au%2Faabfj%2Fvol8%2Fiss2%2F9&utm_medium=PDF&utm_campaign=PDFCoverPages
http:
o.uow.edu.au/aabfj?utm_source=ro.uow.edu.au%2Faabfj%2Fvol8%2Fiss2%2F9&utm_medium=PDF&utm_campaign=PDFCoverPages
http:
dx.doi.org/ XXXXXXXXXX/aabfj.v8i2.9
The Case of a Newly Implemented Modern Management Accounting
System in a Multinational Manufacturing Company
Abstract
Contemporary management accounting techniques (such as TQM, BSC, JIT) are widely lauded by academia
ut 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
ationale 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 i
elevant 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
This article is available in Australasian Accounting, Business and Finance Journal: http:
o.uow.edu.au/aabfj/vol8/iss2/9
http:
o.uow.edu.au/aabfj/vol8/iss2/9?utm_source=ro.uow.edu.au%2Faabfj%2Fvol8%2Fiss2%2F9&utm_medium=PDF&utm_campaign=PDFCoverPages
121
Technical Note
The Case of a Newly Implemented Modern
Management Accounting System in a
Multinational Manufacturing Company
Daniel Watts1, P.W. Senarath Yapa2 & Steven Dellaportas3
Abstract
Purpose 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).
Design/methodology/approach – 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.
Findings – The findings indicate that despite demonstrating some relevance of the management
accounting information, the manufacturer deactivated components of the system that were
deemed i
elevant at particular levels of the organisation.
Originality/value – 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
JEL Code(s): M40
1 McGrathNicol, Australia
2 RMIT University
3 RMIT University, XXXXXXXXXX
AABFJ | Volume 8, no. 2, 2014
122
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., XXXXXXXXXXWhere 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, XXXXXXXXXXThe
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, XXXXXXXXXXWith 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, XXXXXXXXXXWhilst 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, XXXXXXXXXXIndustry 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.
The onset of globalised competition and ready access to high technology has forced
companies to change the way they operate (Langfield-Smith et al., XXXXXXXXXXIncreasing IT
investment is touted as the advantage that provides the leverage for achieving a stronger more
flexible production process to deal with persistent change and improve organisational
performance (Chenhall, 2003; Grandeet al., XXXXXXXXXXDechow et al., XXXXXXXXXXclaim that IT automates
many control functions with use friendly systems capable of adaption to low level or line
management. With the rapid development of high-end technology, efficient and instantaneous
communication, and increased competition, many firms have been forced to seek comparative
advantage to remain viable (Langfield-Smith et al., XXXXXXXXXXManagement accounting systems and
the resulting information used to assist management in its decision making process is argued to
provide a comparative advantage in a dynamic and competitive environment (Chenhall &
Langfield-Smith, XXXXXXXXXXDesigning and maintaining effective cost management systems has
ecome a fundamental task for corporations and their management accountants. IT now plays an
important role in areas that are typically the domain of management accounting. A central and
emerging theme arising from this discussion is the focus on how organisations utilise innovative
technology-based management accounting systems across the value chain to support corporate
strategy. The aim of this study is to investigate the acquisition and implementation of a major IT-
ased management accounting program with management accounting functionality by a modern
multi-national firm and to assess its relevance by seeking to identify the type(s) of systems that
Watts, Senarath Yapa & Dellaportas | Newly Implemented Modern Management Accounting System
123
are utilised at different organisational levels and the rationale behind upgrading or improving its
system(s).
The identification and analysis of how well a management accounting system has been
implemented and subsequently utilised in a multi-national firm provides a practical perspective
on how industry perceives the relevance of management accounting. The installation of
management accounting systems and the degree to which they are utilised is left up to individual
firms (Bromwich & Bhimani, XXXXXXXXXXThis study, based on a single case with semi-structured
interviews, provides deep and personal insight on the issues facing an organisation in
implementing a contemporary management accounting system, at a time where delays may mean
loss in market share or an ill-needed drop in profitability. Dechow et al., XXXXXXXXXXcontend that the
ole of information technology as a provider of information and facilitator for management
accounting is an important area for further investigation. This study examines the relevance of a
ecently implemented technology-based management accounting system. Data is sought on the
elevance of management accounting information by management in their strategic and
operational decision making processes as well as the systems utilised (or discarded) and
modified by the company. Identification of the type, level of detail and format that this
information takes, in addition to external information will assist in forming the conclusions to
this study.
The remainder of this paper is organised as follows: a review of relevant literature is
presented in the next section. This literature review outlines the arguments that call for
management accounting change and the impediments to effective implementation. This section
also highlights the research objectives of this study. Section three outlines the methodology
adopted in this study that is based on a single case with interviews as the primary method of data
collection. This section is followed by a discussion and analysis of the findings in section four
and a conclusion in section five.
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 &