The Blackwell Encyclopedia of Management, Accounting (Blackwell Encyclopaedia of Management) (Volume 1)

454 Pages·2006·4.67 MB·English

by  Colin Clubb

ColinClubb/TheBlackwellEncyclopediaofManagement:Accounting FinalProof 30.11.2004 5:27pm page i
THE BLACKWELL ENCYCLOPEDIA OF MANAGEMENT
ACCOUNTING
ColinClubb/TheBlackwellEncyclopediaofManagement:Accounting FinalProof 30.11.2004 5:27pm page ii
THE BLACKWELL ENCYCLOPEDIA OF MANAGEMENT
SECOND EDITION
EncyclopediaEditor:CaryL.Cooper
AdvisoryEditors:ChrisArgyrisandWilliamH.Starbuck
VolumeI:Accounting
EditedbyColinClubb(andA.RashadAbdel-Khalik)
VolumeII:BusinessEthics
EditedbyPatriciaH.WerhaneandR.EdwardFreeman
VolumeIII:Entrepreneurship
EditedbyMichaelA.HittandR.DuaneIreland
VolumeIV:Finance
EditedbyIanGarrett(andDeanPaxsonandDouglasWood)
VolumeV:HumanResourceManagement
EditedbySusanCartwright(andLawrenceH.Peters,CharlesR.Greer,andStuartA.
Youngblood)
VolumeVI:InternationalManagement
EditedbyJeanneMcNett,HenryW.Lane,MarthaL.Maznevski,MarkE.Mendenhall,
andJohnO’Connell
VolumeVII:ManagementInformationSystems
EditedbyGordonB.Davis
VolumeVIII:ManagerialEconomics
EditedbyRobertE.McAuliffe
VolumeIX:Marketing
EditedbyDaleLittler
VolumeX:OperationsManagement
EditedbyNigelSlackandMichaelLewis
VolumeXI:OrganizationalBehavior
EditedbyNigelNicholson,PinoG.Audia,andMadanM.Pillutla
VolumeXII:StrategicManagement
EditedbyJohnMcGee(andDerekF.Channon)
Index
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T H E B L A C K W E L L
E N C Y C L O P E D I A
O F M A N A G E M E N T
S E C O N D E D I T I O N
ACCOUNTING
Edited by
Colin Clubb
Warwick Business School,
University of Warwick
First edition edited by
A. Rashad Abdel-Khalik
ColinClubb/TheBlackwellEncyclopediaofManagement:Accounting FinalProof 30.11.2004 5:27pm page iv
#1997,1999,2005byBlackwellPublishingLtd
exceptforeditorialmaterialandorganization#2005byColinClubb
BLACKWELLPUBLISHING
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Firstpublished1997byBlackwellPublishersLtd
Publishedinpaperbackin1999byBlackwellPublishersLtd
Secondeditionpublished2005byBlackwellPublishingLtd
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TheBlackwellencyclopediaofmanagement.Accounting/editedby
ColinClubb.
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Rev.ed.of:TheBlackwellencyclopedicdictionaryofaccounting
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Includesbibliographicalreferencesandindex.
ISBN1-4051-1827-X(hardcover:alk.paper)
1.Accounting—Dictionaries. I.Clubb,Colin. II.Blackwell
encyclopedicdictionaryofaccounting.III.Series.
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ColinClubb/TheBlackwellEncyclopediaofManagement:Accounting FinalProof 26.11.2004 10:54pm page v
Contents
Preface vi
AbouttheEditors viii
ListofContributors ix
DictionaryEntriesA–Z 1
Index 423
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Preface
Accounting practice encompasses a wide variety of organizational activities which include the
recording of financial transactions and events in the firm’s books, the use of financial information
for management decision-making and control purposes, and the preparation and audit of financial
statementspreparedforexternaluserssuchasinvestors,customers,andemployees.Therearemany
textbooksavailablewhichprovideintroductory,intermediate,andadvancedtreatmentsofthetech-
nicalandmanagerialissuesraisedbysuchaccountingactivities.Thecurrentvolumecannotpossibly
aimtoprovideindepthcoverageofthevastrangeofactivitieswhichcomprisemodernaccounting
practice.Instead,itaimstoprovideawayintotheexpandingaccountingresearchliteraturewhichin
recent years hascometoprovide avariety ofperspectiveson thebig issues confronting accounting
practice.Ibrieflyconsidersomeoftheseperspectiveshere.
Some of the contributions to the volume focus on particular financial reporting, auditing, or
management accounting topics and outline alternative possible approaches or treatments within
(andperhapsbeyond)existingconventionsorrules.Theinformationcontainedinthemainfinancial
statements(thebalancesheet,theprofitandlossaccount,andthecashflowstatement)isdiscussed;
important aspects of financial reporting such as the treatment of employee stock options, pensions
accounting,andthetreatmentoftaxationareanalyzed;comparativeanalysisoftheuseofstatisticaland
judgmentalmethodsinauditingisprovided:andthenatureofcostingsystemsrequiredtogenerate
productcostinformationinmodernproductionenvironments aredescribed.Whilethesecontribu-
tionstothevolumethrowimportantlightonimportanttechnicaldevelopmentsinthebroadaccount-
ingarena,theyalsodrawattentiontothechoicesthatmustbemadebyaccountingregulators,auditors,
and managers in determining what is an appropriate treatment of a particular item in a company’s
financialstatements,aneffectiveauditprocedureorthe‘‘optimal’’approachtoproductcosting.The
factthatthesechoicescanhaveprofoundeffectsonmanagementdecision-makingandonthefortunes
(and decisions) of important corporate stakeholders or constituencies indicates the fundamental
managerial,economic,andsocialimportanceofdevelopingunderstandingsofthebroaderimplications
ofaccountingpractice.
Theneedtounderstandtheimplicationsofaccountingpracticesforthedecisionstakenbymanagers
and investors, and the implications of these decisions for broader economic and social well-being,
provides important motivation for accounting research with economic, organizational, social, and
historical focus. Severalofthevolumecontributions considertheusefulness ofaccounting froman
economicperspective,forexample,byreviewingthelargeliteratureontherelationshipbetweenshare
priceperformanceandfinancialstatementinformationsuchasreportedprofit,dividends,cashflow,
and R&D spending. Much of the empirical work in this area draws on valuation theory, providing
interesting evidence on the extent to which accounting provides (or at least reflects) fundamental
informationusedbythecapitalmarketstovaluecorporatesecurities.Inadditiontovaluationtheory,
economicperspectivesbasedonagencytheoryandinformationeconomicshavebeenusedtoprovide
insightsintotheproblemsofdesigningperformanceevaluationsystemswhichencourage‘‘optimal’’
managerialdecision-makingandtheproblemsofstructuringofauditcontractstoprovideahighlevel
of audit quality from an investor viewpoint. The volume provides a range of contributions that
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Preface vii
demonstratetheimportanceandpracticalrelevanceofinsightsfromapplyingeconomicanalysistothe
analysisofaccountingissues.
Whilethefinancialfocusofmuchofwhatisusuallyregardedasaccountingpracticeleadsnaturally
totheapplicationofeconomicperspectivesintheanalysisofsuchpractice,therehasbeenagrowing
appreciation in the research literature that accounting is implicated in organizational and social
processes which affect the distribution of resources between stakeholders in the organization and
which affect the impact of an organization on society. A number of entries therefore focus on the
problemsofimplementingprofitdrivendecisiontools,suchasdiscountedcashflow,inthecontextof
organizationalandenvironmentaluncertaintyandtheissuesraisedbythedesignofinternalperform-
anceevaluationsystemstofacilitatemanagerialdecisionsconsistentwithbroaderstakeholderobject-
ivesinprivateandpublicsectororganizations.Theabilityofauditorstoactimpartiallyasguardiansof
theinvestorinterestincompaniesandtherelationshipoffinancialreportingandauditingtothelawis
criticallyexamined.Therelativeimportanceofprofitabilityandalternativeorganizationalobjectives
hasbeenanimportantthemeinmuchrecentresearchandthisisreflectedinarticleswhichconsiderthe
current and historical status of social and environmental reporting as a managerial practice. The
organizational and social roles of accounting is a theme reflected in many entries, emphasizing the
importance of a more explicit recognition by managers andstakeholders ofthe interaction between
accounting practice and organizational decision-making. Diversity of theoretical perspective and
emphasisamongresearchers,however,canmakecomparisonsofresearchinthisareaadifficultissue.
To conclude, this volume aims to provide the reader with a range of articles that highlight
importantissuesinaccounting practiceandthecontributionsthat researchcanmake totheunder-
standing and development of practice. These articles can only provide a general indication of the
varietyofperspectivesandanalysesconductedinthevariousareasanditisthereforehopedthatthey
willencourage(andguide)furtherenquirybythereader.Byleadingtoagreaterappreciationofthe
conceptual foundations of different accounting practices and the sometimes ambiguous economic,
organizational, and social implications of these practices, it is hoped that this volume will help the
readertodevelopadeeperviewoftheusefulnessofaccountingasamechanismforachievingeconomic
andsocialgoals.
ColinClubb
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About the Editors
EditorinChief
CaryCooperisbasedatLancasterUniversityasProfessorofOrganizationalPsychology.Heisthe
author of over 80 books, is past editor of the Journal of Organizational Behavior and Founding
PresidentoftheBritishAcademyofManagement.
AdvisoryEditors
Chris Argyris is James Bryant Conant Professor of Education and Organizational Behavior at
HarvardBusinessSchool.
WilliamHaynesStarbuckisProfessorofManagementandOrganizationalBehaviorattheStern
SchoolofBusiness,NewYorkUniversity.
VolumeEditor
ColinClubbisProfessorofAccountingatWarwickBusinessSchool.Heisaneditorialboardmember
oftheJournalofBusinessFinanceandAccountingandhaspublishedresearcharticlesinawiderangeof
majoraccountingandfinancejournals.
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Contributors
A.RashadAbdel-khalik KashiR.Balachandran
FisherSchoolofAccounting,Universityof SternSchoolofBusiness,
Florida NewYorkUniversity
MohammadJ.Abdolmohammadi RichardBarker
BentleyCollege JudgeInstituteofManagement,
UniversityofCambridge
WalterAerts
UniversityofAntwerp LynnBarkess
UniversityofNewSouthWales
AnwerAhmed
SyracuseUniversitySchoolofManagement SassonBarYosef
TheHebrewUniversity,Jerusalem
ThomasAhrens
LondonSchoolofEconomics VivienBeattie
UniversityofGlasgow
BipinB.Ajinkya
FisherSchoolofAccounting,Universityof MartinBenis
Florida NewYorkUniversity
MimiL.Alciatore AlnoorBhimani
UniversityofHouston LondonSchoolofEconomics
andPoliticalScience
K.B.Ambanpola
NanyangTechnologicalUniversity,Singapore AndrewP.Black
Consultant
SimonArcher
UniversityofSurrey JaneBozewicz
BabsonCollege
A.J.(Tony)Arnold
UniversityofExeter NiamhBrennan
UniversityCollegeDublin
StephenK.Asare
FisherSchoolofAccounting,Universityof Gae´tanBreton
Florida UQAM,Canada
HollisAshbaugh JaneBroadbent
formerlyofUniversityofWisconsin–Madison RoyalHolloway,UniversityofLondon
FrancesL.Ayres PeterBrownell
UniversityofOklahoma TheUniversityofMelbourne