CONTEMPORARY MANAGEMENT ACCOUNTING IN THE UK SERVICE SECTOR ANGELA ...

371 Pages·2017·2.92 MB·English

by  Aston University

CONTEMPORARY MANAGEMENT ACCOUNTING IN THE
UK SERVICE SECTOR

ANGELA LORENZ

A thesis submitted to
The University of Gloucestershire
in accordance with the requirements of the degree of
Doctor of Philosophy
in the Business School

October 2015

ABSTRACT

This study demonstrates an original contribution to knowledge by providing a
deeper understanding of management accounting practices in the context of
service organisations. It explores a number of traditional and contemporary
tools and their relationship to service organisations. The study focuses on the
extent to which both traditional and contemporary tools are utilised in practice
and also the underlying reasons why some tools become embedded in practice
and the barriers and enablers of management accounting change in a service
sector context.
The study is explanatory in nature and uses a cross sectional survey to provide
an understanding of what tools are used by service sector organisations and
five in depth case studies to explore the nature of how the tools are used and
the factors influencing the diffusion of new tools and the replication of existing
tools.
The analysis of the cases is done using Stones (2005) quadripartite framework
which allows a sensitising of the data to provide insights into the external and
internal structures which govern and are governed by the actions of the
accountants.
From the empirical research it was concluded that the management accounting
practices of service sector organisations are similar to those of other
organisational sectors and mainly rely upon the use of the traditional tools with
limited use of the more contemporary tools. The exploration of the tools used in
the case studies showed the internal structures in place which allowed the
traditional tools to be embedded and replicated over time and also the external
structures which when coupled with the internal structures resulted in barriers
and enablers of change to the management accounting tools used.
This thesis contributes to knowledge by providing a greater understanding of
service sector management accounting and by the development of the strong
structuration model to provide valuable insights into management accounting
I
change and to demonstrate the continued theory practice gap in management
accounting.
II
III
AUTHORS DECLARATION

I declare that the work in this thesis was carried out in accordance with the
regulations of the University of Gloucestershire and is original except where
indicated by specific reference in the text. No part of the thesis has been
submitted as part of any other academic award. The thesis has not been
presented to any other education institution in the United Kingdom or overseas.
Any views expressed in the thesis are those of the author and in no way
represent those of the University.

Signed ……………………………………… Date ……………………………….

IV
V
Acknowledgements

I would like to thank my supervisors Tracy Jones and Bob Ryan for their support
and all of my academic colleagues who have given me help, advice and a
sympathetic ear over the time it has taken to complete this work.
I am grateful for the cooperation of those practitioners who gave their time to
complete the survey and also to the accountants who gave their time and
insights with respect to the case study work.
I would also like to thank all my friends who have been consistent in their
encouragement of my undertaking this PhD and to my partner Tony and
children Amber and Sienna for their unwavering belief and the sacrifices of
family time they have made.

VI
Table of Contents
ABSTRACT ......................................................................................................... i
AUTHORS DECLARATION .............................................................................. iv
Acknowledgements ......................................................................................... vi
List of Tables .................................................................................................. xiii
List of Figures ................................................................................................. xv
Glossary ......................................................................................................... xvi
Chapter One: Introduction ............................................................................... 1
1.1 Research Motivation .................................................................................. 1
1.2 Aim of the thesis ........................................................................................ 8
1.3 Research Questions and Objectives ......................................................... 9
1.4 Thesis Structure ...................................................................................... 10
Chapter Two: Literature review ..................................................................... 13
2.1 Introduction .......................................................................................... 13
2.2 Historic development of Management Accounting ............................... 13
2.3 Traditional Tools of Management Accounting ......................................... 19
2.3.1 Budgeting .......................................................................................... 20
2.3.2 Budgetary Control ............................................................................. 22
2.3.3 Standard Costing .............................................................................. 23
2.3.4 Absorption Costing............................................................................ 26
2.3.5 Marginal Costing ............................................................................... 29
2.3.6 Capital budgeting .............................................................................. 30
2.3.7 Traditional performance measures ................................................... 32
2.4 Management Accounting Relevance Lost ............................................... 35
2.5 Contemporary tools of Management Accounting ..................................... 42
2.5.1 Extensions to existing practice .......................................................... 42
2.5.1.1 Budgeting ............................................................................................................ 42
2.5.1.2 Throughput Accounting ...................................................................................... 46
2.5.2 New Techniques ............................................................................... 48
2.5.2.1 Activity Based Costing ......................................................................................... 48
2.5.2.2 Activity Based Management ............................................................................... 50
2.5.2.3 Kaizen costing ..................................................................................................... 51
2.5.3 Strategic Management Accounting ................................................... 52
2.5.3.1 Costing tools ........................................................................................................ 54
VII
2.5.3.1.1 Attribute Costing .......................................................................................... 54
2.5.3.1.2 Life-cycle Costing .......................................................................................... 55
2.5.3.1.3 Quality Costing ............................................................................................. 56
2.5.3.1.4 Target Costing ............................................................................................... 57
2.5.3.1.5 Value Chain Costing ...................................................................................... 58
2.5.3.2 Planning, Control and performance measurement ............................................. 58
2.5.3.2.1 Benchmarking ............................................................................................... 58
2.5.3.2.2 Integrated Performance measurement........................................................ 59
2.5.3.2.3 The Balanced Scorecard ............................................................................... 60
2.5.3.2.4 Results and Determinants model ................................................................. 61
2.5.3.2.5 Performance Pyramid ................................................................................... 61
2.5.3.2.6 Performance Prism ....................................................................................... 61
2.5.3.3 Strategic Decision Making ................................................................................... 63
2.5.3.3.1 Strategic Cost Management ......................................................................... 63
2.5.3.3.2 Strategic Pricing ............................................................................................ 63
2.5.3.3.3 Brand Valuation ............................................................................................ 64
2.5.3.3.4 Competitor Accounting ................................................................................ 64
2.5.3.3.5 Competitor Cost Assessment ....................................................................... 65
2.5.3.3.6 Competitive Position Monitoring ................................................................. 65
2.5.3.3.7 Competitive Performance Appraisal ............................................................ 65
2.5.3.4 Customer Accounting .......................................................................................... 66
2.5.3.4.1 Customer Profitability Analysis .................................................................... 66
2.5.3.4.2 Lifetime Customer Profitability Analysis ...................................................... 67
2.5.3.4.3 Valuation of Customers or Customer Groups as Assets ............................... 67
2.5.3.5 Empirical evidence of SMA .................................................................................. 67
2.5.3.6 Summary .............................................................................................................. 68
2.6 Enterprise resource planning and advanced management accounting ... 68
2.7 Empirical review ...................................................................................... 69
2.8 Management Accounting Change ........................................................... 71
2.9 Theory Practice Gap ............................................................................... 75
2.10 Chapter Summary ................................................................................. 77
Chapter Three: Service sector context ......................................................... 78
3.1 Introduction ............................................................................................. 78
3.2 Service: a definition ................................................................................. 78
3.3 Economy ................................................................................................. 78
VIII