T. Colwyn Jones

Anticipating the Impact of IFRS on the Management of German Manufacturing Companies: Some Observations from a British Perspective

Abstract The introduction of International Financial Reporting Standards (IFRS) in 2005 marked a significant departure from Germanys traditional financial accounting practices. This paper questions whether this change may have consequential effects on the distinctive traditional management accounting practices in the field of Controlling. We examine the possible impact on manufacturing companies drawing upon perceptions and expectations of managers in three Bavarian companies and two management consultancy firms. We consider whether financial accounting will assume an increased importance within firms, and whether this may lead to abandonment of some traditional management accounting practices and the adoption of different techniques in internal reporting compatible with the new IFRS regime for external reporting. This prompts consideration of whether such changes would lead to financial accounting domination of management accounting in Germany analogous to that argued by Johnson and Kaplan in 1987 in their ‘Relevance Lost’ thesis. We conclude that, at this juncture in the development of their information systems, German managers face an important choice between integrating external and internal reporting in ways that might fundamentally change established Controlling practices, or of continuing to operate dual accounting systems in much the same way as in the past so that adoption of IFRS is restricted to external reporting.

Understanding management accountants: The rationality of social action

Abstract In investigating management accounting, field researchers attempt to understand those who practice it. This involves explaining management accountants actions in terms of their meanings. Practitioners do not see accounting as a purely technical activity-objective, factual and neutral. Instead, they see it as a social activity and draw on many meanings objective, subjective, inter-subjective, positional-in explaining how they construct practice within specific social contexts. It is this which constitutes management accounting rationality in practice. Critical accountants need to understand this rationality if they are to explain, and change, management accounting.

Battles in the costing war: UK debates, 1950-75

Abstract In the UK, 1950–75 was a lively period in the long-running debates between proponents of absorption and marginal costing. In the nexus of competing interests, management accountants advocated and defended rival costing systems with much vigour and passion. Expressed in the language of the times, these debates were ‘battles’ in the costing ‘war’. We focus on these battles, analysing the various forces that operated upon the combatants, and locate them in the wider costing war. We conclude that no final resolution of the conflict was achieved in the twentieth century, nor is one likely in the foreseeable future.

Direct versus absorption costing: A reply

We are pleased that a reader of Accounting Business and Financial History was sufficiently stimulated to supply some further thoughts on the subject of direct versus absorption costing. We are also pleased that the editors of the journal have invited us to reply. The central issue raised is the contributor’s view that: ‘If a combatant had been made to spell out his case fully, he would have seen that he was right in certain circumstances but not in others’. Apparently, clear-headed debate could have resolved the issues raised during the ‘costing war’. Our response is that much of the debate was clear headed; but it did not lead to agreement, it led to conflict. The contributor reaches his/her conclusion following an economic analysis of the arguments for and against the two systems of costing. Direct costs are seen as simpler and consistent with economists’ teaching on marginal analysis. However, for practical reasons, direct costs may be incomplete and, even if complete, may ‘lure him into an unfortunately low quotation’. Absorption costing was ‘more helpful’ in providing a guide to prices that covered overhead. However, absorption costs will always be, to some extent, arbitrary because of the treatment of joint costs. A critic will hold that: ‘absorption cost can be defended only on the grounds that it works well in practice; it is sadly at odds with principle’. The contributor’s analysis presumes a debate couched entirely in economic terms; but this misses a key issue in our paper: that the costing ‘war’ cannot be understood by simply examining economically rational arguments. A large number of actors, representing different organizations and institutions, were involved in the direct versus absorption costing debate and, to understand their arguments, it is necessary to analyse their objectives and values. In some cases this is reasonably straightforward. Accounting standard setters explicitly stated their objective of ensuring consistency in financial reporting and the Inland Revenue seemed to be driven by desire to maximize short-run tax revenue. However, in other cases, the analysis is not so simple. We argue that even those who appear to have a common Accounting, Business & Financial History Vol. 15, No. 1, 93–95, March 2005