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Management Accounting Change
Management accounting change is not a consistent fact. Thus, one might expect the original factors of change to be miscellaneous and this has of course been established by management accounting researchers. It is clear that the outer factors (environmental) and inner factors respectively (linking to the business concerned) have affected the recent evolution of new management accounting systems and methods. According to Shields (1997), the probable determinants of alteration are contests, computer systems, managerial plans and strategies. These factors also demonstrate the unlikely roles which the main features can have in the course of change. Alteration in atmosphere results in uncertainty and risk which generate a demand for advanced administration accounting alteration in the form of ‘non-financial’ measures (Vaivio, 1999). Little importance has been accorded by researchists to the organization accounting alteration course of action. Burns and Scapens (2000, p. 4) noticed that, “less focus has been given to comprehending the stages through which new organization accounting systems and performance have become evident (or failed to merge)later”.
Alteration can be conveyed in a variety of ways. As per The American Heritage Dictionary, 4th Edition, amendment consist of the following features: becoming different or undergo modification ; change or alteration; from one stage to another; making an exchange; changing; replacement; giving and receiving complementarily; substitute with another; abandon, this definition depicts different kinds of change and reveal that, conventionally, it is not a consistent phenomenon. Wickramasinghe and Alawattage (2007) urge change in management accounting as a learning framework to understand how environmental factors determine internal process within a company. According to them, the system of change indicates how management accounting methods arose , developed and was modified when innovative demands from the varying atmosphere are prepared.
From a managing accounting view, studies can be conducted upon various kinds of changes. For example Sisaye (2003) research change with respect to the confederation of Activity Based Costing (ABC) into plans to control company’s day-to-day activities. It is advised that ABC can promote improvement in organizational performance if applied as part of the organizational change strategy as a whole. Perera, McKinnon and Harrison (2003), considered amendments in term of initiation, abandonment and reestablishment of transfer pricing in state trading venture as it moved from protected monopolistic position to commercialization.
Investigators have shown an interest in accepting organization accounting alteration (Baines & Langfield-Smith, 2003; Chenhall & Langfield-Smith, 1998b; Innes & Mitchell, 1990; Libby & Waterhouse, 1996). For instance, Chenhall and Langfield-Smith (1998b) have examined the advantage of organization accounting alteration but little is recognized about the factors that fuel this change (Laitinen, 2006). The factors for management accounting to modify are named “motivational factors” (Laitinen, 2006). Many researchers have proposed a fundamental list of prevocational forces(Baines & Langfield-Smith, 2003; Laitinen, 2001; Libby & Waterhouse, 1996). For instance, Innes and Mitchell (1990) discovered a different set of conditions associated with management accounting change, which they named as follows:
- Motivators (e.g., fierce market, organizational formation, and computer systems)
- Catalyst (e.g., negative economic performance, failure of market share, managerial modification)
- Facilitators (e.g., accounting staff capital, level of freedom, accounting demands)
The interdependence between these variables encourages change not only in organization accounting but also other related regulations (Innes & Mitchell, 1990; Laitinen, 2006). Laitinen (2001) grouped these factors in six groups: data requirement; modification in computer systems and environment; zeal to change; resources for alteration; goals for change; and external requirements. Laitinen (2006), on the other hand, used four categories of factors to explain organization accounting change: managerial factors; monetary factors; stimulating factors; organization tools.
Although, assorted factors have been linked with organization accounting change, this research considers three factors, i.e., stimulating factors, managerial factors and economic factors. Alterations in environment and technology act as motivational factors in describing management accounting modification and changes in organizational determinants (i.e., formation & planning).What is more, organizational formation& planning (organizational factors) are regarded as situational factors inside the firm that may have a relation to change in management accounting (Moores & Yuen, 2001). Monetary factors are used as results of management accounting and organizational change. Grandlund (2001) said that low financial outcome may put financial pressure on the firm to change its systems to improve results. Baines and Langfield-Smith (2003) said that if management accounting change is associated with a greater dependence on accounting data, it may lead in better performance. Therefore, monetary performance may be a precursor or an outcome factor of management accounting change.
Several firms have seen major changes in their production surroundings with development in information technology, extremely competitive environments, new organization strategies, and a better emphasis on quality and customer services. Many important management accounting research have noticed the considerable changes in these working surroundings(e.g., Burns & Vaivio, 2001; Choe, 2004; Gomes, Yasin, & Lisboa, 2007; Haldma & Laats, 2002; Hopwood, 1990; Hussain & Hoque, 2002; Innes & Mitchell, 1995; Kaplan & Norton, 1996; Libby & Waterhouse, 1996; Scapens, 1999; Vamosi, 2003) which have influenced the choice of which organization accounting systems and methods would be highly helpful (Waldron, 2005) and foster the organization to re-evaluate its design and strategy (Baines & Langfield-Smith, 2003) in sustaining and/or upgrading results(Chenhall & Langfield-Smith, 1998a; Choe, 2004).
Managerial change is a fundamental concern within organizational theory, management and accounting. Hopwood (1987, p. 207) proclaimed that ‘very little is known of the stages of accounting change’. This has evoked debate over the theory of why and how changes are taking place. As argued by Quattrone and Hopper (2001, p. 404), ‘what the notion of alteration means, whether it can be theoretical zed in parallel from its process and how these factors connect to the practice of accounting is taken for granted and is badly understood. Researchers have commended different theoretical frameworks to clarify these accounting changes, e.g. Gordon and Miller (1976) commend possibility theory while Burns and Scapens (2000) offer old institutional economic theory (OIE). Contingency theory described how changes in a situation enclose organization leads to changes in managerial factor plus its accounting practice and decision making process. While previous institutional fiscal theory recommends how accounting and organization can alter through the process of institutionalization.