Changing practice in accounting for service charges in commercial property: A longitudinal analysis

Abstract

Purpose

The paper examines how accounting practice changes, which forces generate change, and the role of a best practice benchmark within this. It examines this process of change within service charge accounting in commercial property. The purpose of this paper is to establish that “best” practice is of a low standard and poorly implemented, and then explain this.

Design/methodology/approach

Data are hand‐collected from the original accounting source documents that are routinely provided to commercial leaseholders as part of the service charge management and accountability process. Evidence is generated by directly examining actual service charge budgets and periodic certificates of expenditure incurred to reduce bias, create complete data and ensure authenticity. The findings are then fleshed out and reinterpreted by utilising models created using Laughlin's middle‐range thinking methodology.

Findings

“Best” practice is neither onerous nor “best” when compared with normal accounting practices in other occupations. Whilst the 2006 Code of Practice has improved service charge management, the majority of certificates do not conform to best practice. This suggests that “best” practice is rather less a statement of current good practice and rather more an idealised view of the industry enacted due to wider issues, such as tenant resentment attracting government interest, ideas diffusing into the sector from elsewhere or a profession seeking to improve its occupational control.

Research limitations/implications

The sample of service charge budgets and certificates used in this work represents approximately 6.2 per cent of the total estimated multi‐let office space in England and Wales and covers the period 1998‐2009, with the majority of the buildings being tenanted by organisations within the financial services sector. Content analysis is utilised in order to interpret the data and to test actual practice with that required in the Code of Practice. In certain instances such analysis requires some subjective judgement and interpretation by the researchers.

Originality/value

Data are original and the paper offers a unique benchmarking test. The area of service charge management is unpublished and offers an interesting contrast to the better studied regions of the profession. By shedding light into this backwater, it provides the opportunity for academics and professionals to engage in a discourse that will improve practice, perhaps opening up the discipline to new and better practices. It also illuminates the previously technical literature on the concept of best practice with an original conceptual framework in which to review the construct.

Citation

Holt, A., Eccles, T. and Bond, P. (2012), "Changing practice in accounting for service charges in commercial property: A longitudinal analysis", Journal of Accounting & Organizational Change, Vol. 8 No. 2, pp. 186-209. https://doi.org/10.1108/18325911211230362