AN INVESTIGATION INTO THE DIFFUSION OF COST AND MANAGEMENT ACCOUNTING INNOVATIONS IN AUSTRALIA

Transcription

1 AN INVESTIGATION INTO THE DIFFUSION OF COST AND MANAGEMENT ACCOUNTING INNOVATIONS IN AUSTRALIA Dr Davood Askarany, The University of Auckland, Business School, Accounting and Finance Private Bag: 909, Auckland, New Zealand Keywords: ABC, ABM, BSC, Target costing, JIT, Strategic management, and management accounting innovations. Corresponding Address: Dr. Davood Askarany Business School, BBIM The University of Auckland, Auckland, New Zealand Telephone: ext Fax:

2 AN INVESTIGATION INTO THE DIFFUSION OF COST AND MANAGEMENT ACCOUNTING INNOVATIONS IN AUSTRALIA Abstract Contemporary studies suggest that the take-up of most of recent management accounting innovations still lag behind those of traditional systems. However, except few (e.g. activitybased costing and balanced scorecard) other management accounting innovations relatively received less publicity in the literature. So, it is not very clear what the other main management accounting innovations of the past three decades (both from academic and practitioner perspectives) are. Performing a historical review of the development of cost and management accounting innovations, this paper addresses the major developments of management accounting innovations in the literature and then examines the extent of the introduction, the diffusion and the levels of organisational satisfaction with management accounting techniques in Australia over the past decades. The historical review of the development of cost and management accounting innovation in this study confirms the existence of an ongoing challenge for management accounting techniques over time in terms of coping with the requirements of other developments/innovations such as technological changes and innovations in manufacturing systems and information systems in organisations. According to the findings, despite the introduction of a considerable number of management accounting innovations during the past three decades, the majority of organisations in Australia (more than 50%) are reluctant to implement new management accounting techniques and at the same time are unhappy with their implemented management accounting techniques. However, according to the findings, there has been a positive development (from 003 to 007) in terms of the extent of organisations satisfactions with their implemented management accounting innovations.

3 . Introduction According to Kaplan (994), the 980s and 990s have seen a revolution in terms of innovations in management accounting theory and procedures. It won t be an exaggeration if we link such a revolution (in terms of innovations in management accounting theory and procedures) to the scope and speed of technological changes and innovations which organisations encountered with, in the same period. For example, is argued that the main motivation behind the introduction of recent management accounting innovations in 980s such as activity-based costing (ABC) can be related to the substantial criticisms about traditional cost and management accounting practices for their lack of efficiency and capability in coping with the requirements of a changing environment (Anderson, 995; Beng, Schoch & Yap, 994; Bork & Morgan, 993; Gosselin, 997; Hartnett & Lowry, 994; Horngren, 995; Kaplan, 006; Lefebvre & Lefebvre, 993; Shields, 995; Spicer, 99; Swenson, 995). According to (Vollmer, 009), management accounting as a normal social science has been confronted with the social character of technological changes and other innovations in the constitution of contemporary social life. Given the above, from a theoretical perspective, we may argue that recent development of cost and management accounting innovations is in line with a systems theory approach. According to this theory, all parts of a system are related to each other and any change in one part of a system or an organisation may require appropriate change(s) in other parts of the system/organisation, otherwise, the system may not work properly. The introduction of recent cost and management accounting innovations and their diffusion could be considered to fit such a model. So, it might be suggested that recent technological innovations, such as innovations in manufacturing processes, communication and information systems require the consideration of the subsequent and necessary innovations in administration systems, particularly in cost and management accounting techniques and practices (Kellett & Sweeting, 99). Adopting the systems theory approach for studying recent management accounting changes raises important questions regarding the adequacy of change/s (or innovation) in cost and management accounting techniques in response to the implemented changes in other parts of organisations (e.g. technological changes/innovations in manufacturing processes or information systems) on the one hand and the levels of satisfaction of organisations with their implemented management accounting techniques (as a proxy to examine whether or not the system/organisation is working properly) on the other hand. 3

4 Performing a historical review of the development of cost and management accounting innovations, this paper tries to identify the major developments of management accounting innovations both in the literature and those which have been introduced to practitioners in Australia. Then it investigates both the levels of implementation of those innovations in practice and the levels of organisations satisfaction (with their implemented management accounting techniques). Performing a historical review of the development of cost and management accounting innovations over the past century is expected to highlight the significant developments of recent management accounting innovations during the past three decades and assist management accounting researchers as well as the users of management accounting practices to evaluate the speed and the scope of the diffusion of management accounting innovations over the years and help them to realise whether (or not) there is a need for further developments. In doing so, this paper looks at the developments of management accounting techniques from two perspectives: the academic and the practitioners perspectives. The first perspective addresses the introduction of recently developed cost and management practices in the academic literature and the second perspective addresses the introduction of new techniques to practitioners. Given that it wouldn t be feasible (in a single limited study) to investigate the development of recent management accounting innovations (especially from practitioners perspective) in all countries, this study (from practitioners perspective) focuses on the development of management accounting innovations in Australia. The remainder of the paper is organized in the following way. Section performs a historical review of the development of management accounting innovations. Section 3 examines the extent of introduction of recently developed cost and management accounting techniques to practitioners in Australia. Section 4 and 5 discuss the research methods and the research results for the first and the second surveys on the diffusion of management accounting innovations and the organizational satisfaction in Australia in 003 and 007 respectively. Section 6 concludes the research, identifies its limitations and offers some opportunities for future research. 4

5 . A historical review of the development of cost and management accounting innovations Contemporary studies suggest that the take-up of most of management accounting innovations developed during the past three decades still lag behind those of traditional systems (Anderson, 995: Al-Omiri & Drury, 007b; Anderson & Young, 999; Askarany, 003; Baird, 007; Foster & and Swenson997; Gosselin, 997; Krumwiede, 998; Langfield-Smith, 997) According to Johnson & Kaplan (987), most of available (by 980s) cost and management accounting procedures were developed during the nineteenth century and first quarter of the twentieth century. According to Chandler (977), management accounting systems (MAS) first appeared in the United States during the nineteenth century. These MAS employed both simple and sophisticated accounting methods. For example, the early management accounting measures were simple but seemed to satisfy the needs of business owners and managers. Simple managerial accounting procedures created during the nineteenth century were used to monitor and evaluate the output of internally directed processes. Cost accounts were used to ascertain the direct labour and overhead costs of converting raw materials into goods. The use of sophisticated accounting procedures also dates back to the nineteenth century. According to Porter (980), some companies in the USA used sophisticated sets of cost accounts as early as the first quarter of the nineteenth century. During this period, new accounting systems were devised to control and record the disbursements of cash which provided management with timely and accurate reports on expenditures. A voucher system of bookkeeping, which is used for controlling and recording disbursements was also created during the nineteenth century (Wood, 895). In comparison, before the industrial revolution, accounting was mainly used as a record of the external relations between business units. Information for decision-making and control was usually acquired from market prices (Graner, 954). According to Johnson & Kaplan (987), during the nineteenth century cost accounting became more than just a tool for evaluating internal conversion processes. It was also used as a means to assess the performance of subordinate managers. Moreover, internal accounting systems for evaluating costs, throughput, and working capital were developed during the nineteenth century. New cost measurement techniques for analysing productivity and linking profits to products were developed during the late nineteenth and early twentieth century. These techniques had a substantial impact on twentieth century accounting practices. Some of 5

6 these techniques provided the basis for the development of standards to monitor labour and material efficiencies and costs. This was the time of the development of scientific management that concentrated on gathering accurate information regarding the efficiency of workers engaged in specified tasks. Furthermore, the use of variance analysis of actual costs and standard costs for the purpose of controlling operations was also developed during the nineteenth century. During the nineteenth century scientific management experts also developed new cost accounting procedures to evaluate and control physical and financial efficiency of tasks and processes in complex machine-making firms and to assess the overall profitability of the enterprise (Johnson & Kaplan, 987). Around the 900s managers started paying more attention to productivity and the performance of capital. The design of the Du Pont management accounting procedures during that period facilitated the evaluation of the performance of capital and gave significant attention to the application of return on investment. Such information helped managers in the allocation of new investments among competing economic activities and the financing of new capital requirements (Chandler & Salsbury, 97). According to Johnson & Kaplan (987), before World War I, the Du Pont Company was using almost all of the management accounting procedures for planning and controlling purposes, known until the 980s. As Johnson and Kaplan reported, most of cost and management accounting procedures were developed during the nineteenth and first quarter of the twentieth centuries. They further stated that before World War I some organisations were trying to develop and use an accurate cost accounting systems to trace costs accurately to diverse lines of products. This evidence confirms that even the idea and logic behind activity-based costing for designing an accurate costing method is not new. The application of non-accounting information (financial and non-financial) in management accounting, which has attracted considerable attention in the past two decades is not new either. According to Johnson (99), as far back as the first half of the nineteenth century, business owners and managers were using non-financial information to control organisational operations. The idea of paying more attention to the working people and customers of organisations as a long-term source of profit (which is considered to be among the main perspectives of balanced scorecard) also dates back to before the 950s. So, it seems that the logic behind most of today s management accounting techniques such as ABC, balanced scorecard and performance measurement techniques dates back to more than half of a century ago. For example, according to Bourguignon, Malleret & N rreklit (004), tableau de bord 6

7 as a performance measurement technique (similar to BSC) which focuses on both financial and non-financial information has been used in France for more than 50 years. However, given the growing scope and speed of recent global competitions which organisations are facing with, the demand for management accounting information for the purpose of planning and control decisions is a much more recent phenomenon (Cooper & Kleinchmidt, 990; Johnson, 99; Johnson & Kaplan, 987; Kaplan, 984). Though the above literature suggests that the notion behind most of recent management accounting techniques dates back to before the 950s, the majority of available management accounting techniques have been introduced after the 950s. For example, since the 950s more than 30 popular cost and management accounting techniques have been introduced (Hagerty, 997; Smith, 999). According to Hagerty (997) and Smith (999), the major developments of management accounting techniques since the 950s can be listed as follows: 950s: Discounted cash flows, Total quality management, Cusum charts and Optimum transfer pricing. 960s: Computer technology, Opportunity cost budgeting, Zero-base budgeting, Decision trees, Critical path scheduling, and Management by objectives. 970s: Information economics and agency theory, Just-in-time scheduling, Strategic business units, Experience curves, portfolio management, Materials resource planning, Diversification, Matrix organisation and Product repositioning. 980s: Activity-based costing (ABC), activity-based management (ABM), Strategic management accounting (SMA), Activity management (AM), Life cycle costing (LCC), Target costing, Value-added management, Theory of constraints, Vertical integration, Private labels and Benchmarking. 990s: Business process reengineering, Quality functional deployment, Balanced scorecard, Outsourcing, Gainsharing, Core competencies, Time-based competition and Learning organisation. According to (Dugdale & Colwyn, 998), the application of TOC which is one of the developments of 980s is usually labelled as Throughput accounting. Completing the above list, we can also include Lean accounting as one of the developments of 990s, (Maskell & Baggaley, 006). The main purpose of Lean accounting is to reduce steps in transaction processing, eliminate standard costs in favour of actual costs and discontinue cost allocations (Kennedy & Widener, 008). In describing lean accounting, Kennedy & Widener (008) 7

8 refer to Zaizen costing as continuous improvement and reducing time by eliminating waste and reduction of costs which are the main principles of lean accounting. Updating the above list, we may expand the list to include the Second Generation Balanced Scorecard and the Third Generation Balanced Scorecard as further developments of management accounting innovations in 990s (Cobbold, 004). Expanding the above management accounting innovations, we may also add Time-Driven Activity-Based Costing as another management accounting development in 000s (Kaplan and Anderson, 007). Given the frequency of introduced management accounting techniques in recent years, it does not appear that the lack of cost and management accounting innovations is an issue. Supporting this view, (Kaplan, 994) emphasises that the 980s and 990s have seen a revolution with regards to the innovation in management accounting theory and procedures. Björnenak & Olson (999: 35) also echo this observation by suggesting that during 980s and 990s there has been a rich supply of management accounting innovations in the literature. Johnson and Kaplan (987: 63) go further and argue that until the 980s, the adoption of the discounted cash flow approach for evaluating capital investment projects has been the main innovation in management accounting practice during the past sixty years. They emphasise that in the period between the 90s and 980s no new ideas or thoughts have affected the design and use of cost management systems. The above literature review confirms the introduction of a considerable number of cost and management accounting innovations during the past three decades. However, not all of the above management accounting innovations received adequate attention by practitioners. Reviewing cost and management accounting innovations of the 980s, and 990s, Björnenak and Olson (999: 37) identify the most recent management accounting innovations (up to 999) as follows: activity-based costing (ABC) activity management (AM) and activity-based management (ABM) local information systems (LS) balanced scorecard (BSC) life cycle costing (LCC) target costing (TC) and strategic management accounting (SMA) 8

9 Expanding the above list, Lapsley & Wrigh (004) also consider the following managerial tools as recent management accounting innovations: Key performance indicators (KPIs), Resource accounting and budgeting (RAB), Zero-based budgeting (ZBB), Functional analysis, and Resource management. In line with the above techniques, Chenhall & Euske (007) refer to some of recent management accounting innovations (under management control systems) as follows: activity-cost-management, target costing, life cycle costing quality costing, and performance management innovations such as EVA and balanced scorecards. However, there is no universal consensus with respect to what techniques constitute recent management accounting innovations (Cadez & Guilding, 008). It is argued that many management accounting techniques drawn from other disciplines such as engineering and economics ((Miller, 998; Miller, Kurunmنki & O'Leary, 008). According to Miller et al. (008), practices such as standard costing, discounted cash flow, the distinction between fixed and variable costs, break-even analysis, and much more have been drawn from disciplines other than accounting and then adapted, and constituted as the core of accounting. However, regardless of the origins which management accounting techniques are drawn from, the most popular recently developed techniques which have received considerable attention by Australian practitioners can be listed as follows (Chenhall & Langfield-Smith (998): Activity based costing (ABC): An approach to costing that focuses on activities as the fundamental cost objects. It uses the cost of these activities as the basis for assigning costs to other cost objects such as products, services, or customers. Activity based management (ABM): Use of ABC concepts to facilitate the identification and reduction of non-value-added activities. Balanced scorecard: An integrated strategic performance management framework that helps organisations translate strategic objectives into relevant performance measures, by linking nonfinancial measures with a financial perspective in four areas of performance concerned with: financials, internal process, customers and innovation & learning. Benchmarking: The search for industry best practice that will lead to superior performance. It emphasises an outward focus and seeks to improved performance by learning from the experience of effective organisations. Strategic management accounting (SMA): A focus on the analysis of the external 9

10 environment which mandates corrections and adjustments to the internal control systems structures and decision support systems which are vital for the survival of organisations. SMA has an orientation towards the organisation s environment such as suppliers, customers, and its competitive position relative to both existing and potential competitors. Target costing: A form of costing system in which the manufacturing of a product or the provision of a service is restricted within a predetermined total cost ceiling so that a competitive price is achieved. Given the above, to gain a better picture regarding the awareness of Australian practitioners about recent management accounting innovations, the following section examines the extent of introduction of recently developed cost and management accounting techniques to potential practitioners and users in Australia. 3. The extent of introduction of recently developed cost and management accounting techniques to practitioners in Australia To examine the extent of introduction of latest developed cost and management accounting techniques (up to 990s) to practitioners in Australia, the most widely available technical, professional, and Australian practitioner journals in the field of management accounting were reviewed. These journals included Business Review Weekly (BRW), CPA Journal (the journal of CPA Australia) and Charter (the journal of ICAA). Furthermore, ICAA and CPA conferences, workshops, and professional developments programs in South Australia during 996 to 999 were investigated. These were among the main sources of transferring information on cost and management accounting innovations to potential users in Australia. The purpose of such a study was to get a clear picture of the scope of latest developed cost and management accounting techniques (up to 990s) introduced to practitioners in Australia. Table exhibits the frequency of the most relevant topics regarding latest developed cost and management accounting techniques discussed in the above-mentioned professional journals, conferences, workshops, and professional development programs over the period 996 to 999 in Australia (see Appendix - for details). 0

11 Table : The frequency of discussion of recently developed cost and management accounting innovations in Australian professional journals, workshops and seminars (996-9) Techniques BRW Charter CPA Conferences Total No. of Percentage Discussions Performance measurement and balanced scorecard ABC Value chain analysis TQM Strategic measurement Risk measurement Change in measurement Benchmarking Re-engineering Economic value added (EVA, SVA and VBM) Target costing Life cycle costing Learning organisation Outsourcing Just-in-time 3 Total % Although management accounting literature suggests that ABC is the most talked about techniques of past three decades (Al-Omiri & Drury, 007a; Alcouffe, Berland & Levant, 008; Alsaeed, 005; Baird, Harrison & Reeve, 007; Englund & Gerdin, 008; Kallunki & Silvola, 008; Major & Hopper, 005), as Table shows, there are a variety of other management accounting practices which have been addressed in the literature and introduced to Australian practitioners through professional journals, workshops and conferences in recent years. Given the above, a further survey was carried out to get a better picture in terms of the extent of application of recent management accounting innovations in practice and the levels of organisations satisfaction with implemented management accounting techniques as one of the main motivations for introduction of new management accounting techniques (e.g. Beng, Schoch & Yap, 994; Bork & Morgan, 993; Gosselin, 997; Hartnett & Lowry, 994; Horngren, 995; Lefebvre & Lefebvre, 993; McGowan & Klammer, 997; Spicer, 99). The following section discusses the adopted research method for examining the extent of implementation of management accounting innovations in Australia.

12 4. The first survey on the diffusion of management accounting innovations and the organizational satisfaction in Australia (003) A cross-sectional mailed survey was implemented in this study to examine the extent of implementation of management accounting innovations in Australia. The survey conducted in 003, targeting 50 CPA members employed in building and construction, energy, engineering, healthcare, metals, mining and extraction, paper and packaging, retail, distribution and transport. CPA is the largest professional accounting body in Australia with the majority of its members dealing with cost and management accounting techniques in commerce and industry, making it an appropriate sample for this study. Following Booth and Giacobbe (998), a questionnaire was designed seeking information on the level of implementation of recent management accounting innovations as follows: Discussions have not taken place regarding the introduction of this practice (with anchor of ); A decision has been taken not to introduce the innovation (with anchor of ); Some consideration is being given to the introduction of the innovation (with anchor of 3); The innovation has been introduced on a trial basis(with anchor of 4); The innovation has been implemented and accepted (with anchor of 5). Investigating organisations satisfaction, respondents were asked to indicate the extent of their satisfactions with the implemented management accounting techniques in their organisations. A 5-point Likert-type scale (Abdel-Kader & Luther, 006; Innes et al., 000) was used with anchors of to very dissatisfied and 5 to very satisfied. Pilot tests of the instrument were initially undertaken with a group of university academics, managers and management accountants. Before the survey instrument was mailed to the organisations under investigation, its content validity was addressed by asking a group of management accounting lecturers and postgraduate students with manufacturing experience to review the instrument for clarity and meaning and to refine the design and focus of the content further. Modifications were made as deemed necessary. To help motivate response, respondents were offered a final report of the results together with the resulting recommendations to facilitate the implementation of recent cost and management accounting innovations in their organisations. 4. Results Responses to the survey were gathered by 00 questionnaires, representing a response rate of 0%. Non-response bias was examined both by using the aggregate details provided by CPA members (number of employees, implemented innovations, and the activities of the firms)

13 and through a comparison between early and late responses. The former showed responses to be representative, the latter that there was no perceived difference between these responses, suggesting that non-response bias would not influence the outcomes. Table illustrates the extent of the implementation of recent management accounting innovations in Australian firms. Table : the extent of the implementation of recent management accounting innovations in Australian firms Type of cost and management accounting practice Discussions have not taken place regarding the introduction of this practice A decision has been taken not to introduce this practice Some consideration is being given to the introduction of this practice This practice This practice has has been been introduced on a implemented and trial basis accepted Activity based costing Activity based management Balanced scorecard Benchmarking Strategic Management Accounting Target costing Tables 3 reports the details of the analysis of scale reliability and unidimensionality for the above management accounting innovations. The six-item measure achieved an alpha value of (Cronbach, 95) and a standardized item alpha of This figure is marginally below the value of 0.70 recommended by (Nunnally, 978) (978, p.45), but can be regarded as moderate (Brownell & Dunk, 99), p.697) and acceptable (Daft and Macintosh, 98, p.4). Table 3 further shows the total-item correlations for each of the scale composites, with ranges from to According to (De Vaus, 99), p.39), values above 0.30 generally indicate acceptable scale undimensionality. 3

14 Table 3: Analysis of scale reliability and undimensionality: management accounting innovations Management accounting techniques Cases Mean Std Dev Correlated Item- Total Correlation Alpha if item deleted Activity based costing Activity based management Balanced scorecard Benchmarking Strategic Management Accounting Target costing The above innovations were tested for univariate normality using the Kolmogorov-Smirnov test and the tests of the indices of skewness and kurtosis. In all cases the assumption that the sample represents a normal population could not be rejected. The findings of current study suggest that the frequency of adopters of recently developed cost and management accounting innovations (addressed in this study) in Australia are still less than those of non-adopters. However, advocates of new management accounting innovations (such as ABC and BSC) suggest that the adoption of recent management accounting innovations would contribute to overall performance of organisations and thus increase organisational satisfaction (Adam & Fred, 008; Banker & Mashruwala, 007; Dikolli, Kinney & Sedatole, 007; Kelly, 007; Vera-Munoz, Shackell & Buehner, 007). For example, (Adam & Fred, 008) find that the extent of ABC implementation in organisations is significantly and positively associated with quality, cost, profitability and cycle-time improvements. As another example, (Banker & Mashruwala, 007) and (Vera-Munoz et al., 007) find a significantly positive correlation between employee satisfaction (as one element on non-financial measures used in balanced scorecard) and profitability in organisations. Given the above, examining organisational satisfactions with their implemented management accounting techniques as one of the main motivations for the development of new management accounting techniques, Table 4 reveals the level of satisfaction of Australian firms with their implemented cost and management accounting systems as follows: 4

15 Table 4: Level of satisfaction with current system Very Moderately Needs Very Total Satisfied Satisfied Improvement Dissatisfied Dissatisfied 9% 3% 39% 3% 7% 00% The findings indicate that only 9 percent are very satisfied and 3 percent are moderately satisfied with their current system. However, the majority (59 percent) of establishments are either dissatisfied with their adopted cost and management accounting systems or believe that their systems need improvement. Table 5 reveals the significance of association between organisational satisfaction and the levels of implementation of six management accounting techniques in Australia. Table 5: The significance of the association between organisational satisfaction and the levels of implementation of six management accounting techniques in Australia ABC ABM BSC Benchmar SMA Target king costing Satisfaction with current systems According to Kendall s tau-b, the level of association between the organisational satisfaction and the extent of implementation of activity-based costing has a value of 0.06 (standard error 0.085), which is statistically significant only at the 0.85 level. Thus the findings do not support the notion that the higher the levels of adoption of ABC, the higher the levels of organisational satisfaction. Though the above findings are not in line with what advocates of ABC (e.g. Adam & Fred, 008) believe, the results are consistent with those findings such as (Banker, Bardhan & Chen, 008) which suggest that ABC adoption by itself does not improve organisational performance. Kendall s tau-b for the level of association between the organisational satisfaction and the extent of implementation of activity-based management (ABM) has a value of 0.09 (standard error 0.087), which is statistically significant only at the 0.94 level. Thus as with the ABC, the findings do not support the notion that the higher the levels of adoption of ABM, the higher the levels of organisational satisfaction. Kendall s tau-b for the level of association between the organisational satisfaction and the extent of implementation of balanced scorecard (BSC) has a value of 0.04 (standard error 0.084), which is statistically significant only at the 0.67 level. So, similar to ABC and ABM, the findings do not support the notion that the higher the levels of adoption of BSC, the higher the levels of organisational satisfaction. 5

16 According to Kendall s tau-b, the level of association between the organisational satisfaction and the extent of implementation of benchmarking has a value of 0.05 (standard error 0.086), which is statistically significant only at the level. Thus these findings also do not support the notion that the higher the levels of adoption of benchmarking, the higher the levels of organisational satisfaction. And finally, Kendall s tau-b for the level of association between the organisational satisfaction and the extent of implementation of strategic management accounting (SMA) has a value of 0.09 (standard error 0.084), which is statistically significant only at the level. So, similar to other five techniques, the findings do not support the notion that the higher the levels of adoption of SMA, the higher the levels of organisational satisfaction. Kendall s tau-b for the level of satisfaction with implemented accounting systems and the diffusion of target costing has a value of (standard error 0.080), which is statistically significant only at the level. Thus these findings also do not support the notion that the higher the levels of adoption of target costing, the higher the levels of organisational satisfaction. According to the findings, the extent of organisations satisfactions with their implemented management accounting systems is not significantly related to the adoption of any of six management accounting innovations (addressed in this study). This might appear to be at odds with the literature (especially the ABC literature), which regards organisational dissatisfaction with their implemented traditional accounting systems as a major motivation for the diffusion of new management accounting techniques (Beng, et al. 994; Bork and Morgan 993; Gosselin 997; Hartnett and Lowry 994; Lefebvre and Lefebvre 993; Spicer 99). The above results could lead to two possible interpretations: either the levels of adoption of recently developed cost and management accounting techniques have not been high enough to satisfy the users expectations, or these new techniques have not had much to offer. 5. The second survey on the diffusion of management accounting innovations and the organizational satisfaction in Australia (007) A second survey questionnaire was mailed to,75 registered CIMA members who were working in managerial accounting sections of Australian organisations in 007 and had necessary experiences. Hard copies of the questionnaires were sent to all targeted populations followed by a general announcement on CIMA website (in three weeks time) encouraging 6

17 those CIMA members who had received the hard copies of the questionnaires but didn t complete them to fill up an online version of the questionnaire. As with the first survey, respondents were asked to indicate the extent of the diffusion of management accounting innovations in their organisations, by using a 5-point Likert-type scale (Abdel-Kader & Luther, 006; Innes et al., 000) as follows: with anchors of discussions have not taken place regarding the introduction of ABC ; a decision has been taken not to introduce ABC ; 3 some consideration is being given to the introduction of ABC in the future ; 4 ABC has been introduced on a trial basis ; and 5 ABC has been implemented and accepted. Investigating organisations satisfaction, respondents were asked to indicate the extent of their satisfaction with the implemented management accounting techniques in their organisations. A 5-point Likert-type scale (Abdel-Kader & Luther, 006; Innes et al., 000) was used with anchors of to very dissatisfied and 5 to very satisfied. Table 6 illustrates the extent of the implementation of recent management accounting innovations in Australian firms. 5. Results The final number of useable responses (both hard copies and online replies) was 30 (30 completed questionnaires plus 88 not-completed or not delivered). The final completed questionnaires have provided the authors with satisfactory response rates of 8.5%. According to Krumwiede (998), the normal response rates for these kind of surveys is approximately 0 percent though there are many published surveys with lower response rates such as.5 percent (Brown, Booth & Giacobbe, 004) or 9.6 percent (Al-Omiri & Drury, 007a). Non-response bias was examined both by using the aggregated data provided by CIMA (such as total number of CIMA members working in manufacturing and non-manufacturing organisations, the average length of experiences of CIMA members and their average ages as qualified CIMA members) and comparing them with same information gathered by the surveys, and through a comparison between early and late responses. The former showed responses to be representative, the latter that there was no perceived difference between these responses, suggesting that non-response bias would not influence the outcomes. 7

18 Table 6: the extent of the implementation of recent management accounting innovations in Australian firms Type of cost and management accounting practice Activity based costing A decision Discussions have not has been taken place regarding taken not to the introduction of this introduce this practice practice Some consideration is being given to the introduction of this practice This practice has been introduced on a trial basis This practice has been implemented and accepted Activity based management Balanced scorecard Benchmarking Strategic Management Accounting Target costing Table 7 compares the adoption of management accounting innovations in two periods to identify any changes in terms of the extent of implementation of the techniques (-decrease and +increase) between two survey periods (003 and 007). Table 7: the extent of the implementation of recent management accounting innovations between 003 and 007 in Australian firms Type of cost and management accounting practice This practice has been implemented and accepted by 003 This practice has been implemented and accepted by 007 The percentages of adoption changes Between two periods Activity based costing 9% 3.4% +4.4% Activity based management % 3% +% Balanced scorecard 3% 8.6% +5.6% Benchmarking 35% 46.8% +.8% Strategic Management Accounting 3% 4.7% +.7% Target costing As Table 7 shows, except target costing, the extent of the adoption of all other five management accounting innovations addressed in this study have moderately increased over the four year period (between 003 and 007). However, the findings show that the implementation of target costing has 8

19 significantly decreased over the same period in Australia. This could be an interesting topic for further investigations. As with the first survey, the second survey examines the levels of organisational satisfactions with their implemented management accounting techniques (as one of the main motivations for the development of new management accounting techniques). Table 8 reveals the level of satisfaction of Australian firms with their implemented cost and management accounting systems in 007 as follows: Table 8: The extent of satisfaction with implemented cost and management accounting systems in organisations Very Moderately Needs Very Total Satisfied Satisfied Improvement Dissatisfied Dissatisfied 8.7% 30.% 49.0% 7.4% 4.7% 00% According to Table 8, only 38.0% (8.7%+30.) of respondents in Australia have expressed their satisfaction with their implemented cost and management accounting systems (slightly less than 4% figure for 003). Although the extent of dissatisfaction with implemented management accounting systems is less than % (7.4%+4.7%), a significant percentage of respondents (49%) still believe that their implemented cost and management accounting systems need improvement. Table 9: The significance of the association between organisational satisfaction and the levels of implementation of six management accounting techniques in Australia in 007 ABC ABM BSC Benchmar king SMA Target costing Relationship Standard error Significance However, despite the lack of any significant relationship between the adoption of new management accounting innovations and the levels of organisational satisfaction with their implemented management accounting techniques in 003, the findings of the second survey in 007 indicate a significant positive shift towards the satisfaction with all new management accounting techniques addressed in this study except target costing. According to Table 9, the extent of positive relationship between the levels of organisational satisfactions and the implementation of five management accounting innovations which are statistically significant (at 0.05) are as follows: ABC 0.53, ABM 0.60, BSC 0.67, Benchmarking 0.56, and SMA

20 Finding no significant relationship between organisational satisfactions and the implementation of target costing may justify the significant (-37.9%) drop/abandon in adoption of target costing from 003 to 007 (Table 7). An explanation regarding the significant positive shift towards the satisfaction with all other five new management accounting techniques addressed in this study (from 003 to 007) could be the 4 years time opportunity to experience and better understand and implement the new techniques. Further studies are recommended to shed light on the factors contributing to the above positive attitudes towards these five management accounting innovations (from 003 to 007) in Australia. 6. Conclusion and Limitations The historical literature review of the development of cost and management accounting innovations presented in this paper confirms the exposure of Australian practitioners to the innovative management accounting techniques. The findings suggest that most of the recently developed cost and management accounting practices such as performance measurement and balanced scorecard techniques, activity-based costing, valued added concepts, total quality management, strategic management, risk management, benchmarking, re-engineering, economic value added and target costing have been introduced to Australian practitioners through professional journals, workshops and conferences. However, from implementation perspective, the findings of current study suggest that recent management accounting innovations (addressed in this study) are not widely implemented in Australia. The findings also indicate that the majority of establishments are either dissatisfied with their adopted cost and management accounting systems or believe that their systems need improvement. According to the findings, there has been a positive development (from 003 to 007) in terms of the extent of organisations satisfactions with their implemented management accounting systems. Despite the lack of any significant relationship between the adoption of new management accounting innovations and the levels of organisational satisfaction with their implemented management accounting techniques in 003, the findings of the second survey in 007 indicate a significant positive shift towards the satisfaction with all new management accounting techniques addressed in this study except target costing. According to the findings, all new management accounting techniques addressed in this study except target costing have had a relatively small growing diffusion rate (from % to.7%) form 003 to 007 in Australia. The only exception is target costing which its diffusion has 0

21 suffered a significant drop (-37.9%) form 003 to 007. Such a significant drop may justify the lack of any significant relationship between organisational satisfactions and the implementation of target costing in 007. One possible explanation regarding the significant positive shift towards the satisfaction with all other five new management accounting techniques addressed in this study (from 003 to 007) could be the 4 years time opportunity to experience and better understand and implement the new techniques. Further studies are recommended to shed light on the factors contributing to the above positive attitudes towards these five management accounting innovations (from 003 to 007) in Australia. Further studies are also recommended to shed light on the diffusion of other management accounting innovations such as: Throughput accounting, Lean accounting, Theory of constrain and Outsourcing. The findings, conclusions and the implications of this study should be interpreted based on the normal limitations of mail surveys, such as lack of researcher interaction with respondents and follow up interviews. The main limitation of this research stems from the survey questionnaire approach adopted. Cross-sectional models, such as this one, may not fully identify the complexity of the adoption decision.

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