Emerald | Journal of Accounting & Organizational Change

Learning and the Loosely Coupled Elements of Control

Sinikka Moilanen — 2012-06-01 00:00:00.0

Abstract

Purpose - This study examines how a parent company ensures reliable accounting information from its subsidiaries located in a significantly different environment analyzing the process and its outcomes.Design/methodology/approach - The paper employs the conceptualization of management control as a loosely coupled system to explore the integration of accounting-related work between a parent company and subsidiaries. Three Western firms and their subsidiaries in the territory of the former Soviet Union are studied focusing on the couplings between different elements of control and their outcomes, taking accounting as an object and element of control.Findings - The results show how other elements of control can steer accounting-related work. As the organizational structures made possible personnel controls in the form of informal training in accounting, results controls were responsive to these personnel controls. This constructed common models of thinking, meaning that cultural controls were responsive to results controls. The responsiveness also supports generative learning, since accounting-related training includes and introduces Western business thinking.Originality/value - The findings show that loose couplings within MCSs may lead to generative learning due to the rules imposed by the parent company. Elaborating the dual role of accounting as an object and element of control illustrates a relationship different from the earlier view that loose coupling between parent’s rules and what is locally done tends to foster local stability based on preservation of existing ways of thinking, i.e. adaptation instead of adaptability.

Were Regulatory Changes in Reporting ‘Abnormal Items’ Justified? Evidence of Intra-Period Classificatory Earnings Management Practices in Australia"

Robyn Cameron, Natalie Gallery — 2012-06-01 00:00:00.0

Abstract

Purpose - Managers generally have discretion in determining how components of earnings are presented in financial statements in distinguishing between ‘normal’ earnings and items classified as unusual, special, significant, exceptional or abnormal. Prior research has found that such intra-period classificatory choice is used as a form of earnings management. Prior to 2001, Australian accounting standards mandated that unusually large items of revenue and expense be classified as ‘abnormal items’ for financial reporting, but this classification was removed from accounting standards from 2001. This move by the regulators was partly in response to concerns that the abnormal classification was being used opportunistically to manage reported pre-abnormal earnings. This study extends the earnings management literature by examining the reporting of abnormal items for evidence of intra-period classificatory earnings management in the unique Australian setting. Design/methodology/approach - This study investigates associations between reporting of abnormal items and incentives in the form of analyst following and the earnings benchmarks of analysts’ forecasts, earnings levels, and earnings changes, for a sample of Australian top-500 firms for the seven-year period from 1994 to 2000.Findings - The findings suggest there are systematic differences between firms reporting abnormal items and those with no abnormal items. Results show evidence that, on average, firms shifted expense items from pre-abnormal earnings to bottom line net income through reclassification as abnormal losses. Originality/value - These findings suggest that the standard setters were justified in removing the ‘abnormal’ classification from the accounting standard. However, it cannot be assumed that all firms acted opportunistically in the classification of items as abnormal. With the removal of the standardised classification of items outside normal operations as ‘abnormal’, firms lost the opportunity to use such disclosures as a signalling device, with the consequential effect of limiting the scope of effectively communicating information about the nature of items presented in financial reports.

Changing Practice in Accounting for Service Charges in Commercial Property: a longitudinal analysis

Andrew Holt, Timothy Eccles, Peter Bond — 2012-06-01 00:00:00.0

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 paper establishes that ‘best’ practice is of a low standard and poorly implemented, and then seeks to 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% 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.

The Influence of Sustainability Performance Management Practices on Organisational Sustainability Performance

David Leslie Gadenne, Lokman Mia, John Sands, Lanita Winata, George Hooi — 2012-06-01 00:00:00.0

Abstract

Purpose - This study investigates the relationship between organisations’ sustainability performance management practices and sustainability performance.Design/methodology/approach - Data for the study were collected from 314 medium to large organisations operating in Australia. A mailed printed questionnaire was used to collect the data. Personal interviews with 20 senior executives were conducted to pilot test and refine the questionnaire.Findings - Organisations apply eight sustainability performance management practices (SPMPs) to improve seven different sustainability performance indicators (SPIs). Each of the eight SPMPs is positively associated with at least one or more SPIs. We find that customer value, new product development and information capital performance indicators are each associated with a single SPMP, while the other four performance indicators (environmental, employee value, social responsibility, and financial performance) are each associated with multiple SPMPs. Overall, the results indicate that increasing the level of an organisation’s focus on its individual SPMPs is positively associated with its better performance under one or more SPIs.Research limitations/implications - The study provides a statistically tested framework that can be used for further research investigating the relationships between different SPMPs and SPIs in different contexts and industries, thereby, contribute towards a better understanding of sustainability performance-related issues. We believe the results and the framework may be beneficial to company management in terms of better understanding and prioritising which SPMPs are relatively more important, and therefore should be initiated first. Our results indicate that not all of the eight SPMPs are equally important; some SPMPs are positively associated with more SPIs than others, thereby indicating the relative importance of specific SPMPs.Practical implications - The practices most significantly associated with sustainability performance included those related to social responsibility, new product introduction, process and employee effectiveness, and customer and employee satisfaction. These findings may assist organisations in prioritising their focus on particular sustainability performance management practices for their sustainability performance.Originality/value - This study provides empirical evidence concerning which SPMPs are positively associated with particular SPIs. A framework of the identified SPMPs and SPIs is developed with a view towards promoting future research and practical applications to foster organisational sustainability performance.

Control as governing and socialising. An ethnographic study of management accountants

Jeremy Morales — 2012-06-01 00:00:00.0

Abstract

Purpose - To provide a critical analysis of management accountants’ daily workDesign/methodology/approach - Inductive ethnographic study based on direct observation and interviewsFindings - The thesis highlights how processes of production of a feeling that a community of interests exists, even if it is not necessarily intentional, transform potential conflicts into cooperation and harmony, at least in appearance. However, this making of some consistency remains asymmetrical, and stands upon the construction of divergences and distinctions. Then, accounting is deemed an integrative language, and even a peacemaking one. This promotes an expansion of the financial logic as a dominant rationale in organisations. Management accountants’ work thus reorientates managers’ socialisation processes to promote emerging financial modes of organising and governing in companies.Research limitations/implications - The empirical material might fruitfully be complemented by similar studies using historical materials. The study considers accountants and managers but with a stronger focus on accountants, and could be complemented by a similar study outside financial departments.Originality/value - The value of the document lies in its detailed observation of daily practices, which helped produce a complex and nuanced picture of management accounting practices in their diversity. The theoretical value is related to the critical analysis of power and domination effects observed within management control devices and of the role taken by accountants within socialising and governing processes, the combination of the two functioning to orientate managers’ subjectivity as well as their behaviour.

Management accounting: a stage for conglomerates’ governance. The role of economic calculations in organized action.

Francois-Regis Puyou — 2012-06-01 00:00:00.0

Abstract

Purpose - The dissertation grasps the particular dynamics of conglomerates’ internal governance mechanisms via a study of management accounting practices. It sheds light on MA practices which create arenas for deliberation and coordination between managers of parent companies and of subsidiaries.Design/methodology/approach - Ten relationships between parent companies and subsidiaries, divided into four subsets belonging to different conglomerates, are studied. In every field studies, interviews were conducted with operational managers, directors, and management accountants from the various managerial levels. Findings - MA is neither mainly an instrument of surveillance, nor just a mechanism to reduce asymmetries of information. The individuals’ room for manoeuvre pervades the technical and formal MA mechanisms. MA practices create a social and political space where questions of governance are settled. Management accounting’s essential contribution to business group governance is thus to lay the foundation for a game of three players (parent company managers, subsidiary directors, controllers) blending confidence and control. Each actor engages in power relations that are asymmetric but with limited room for opportunistic behaviour because of their repetitive, procedural and collective nature. Originality/value - This work testifies to the persistence of intermediary centres of governance within conglomerates. Strategies of collaboration and opposition around MA figures are the cement of many social interactions which contribute to the actual governance practices within diversified conglomerates. The thesis shows that management accountants collectively constitute a hardcore of employees whose strategies for reconciling the interests of the owners’ (in the parent companies) with the ones of managers (in subsidiaries) give substance to conglomerates as collective actors.