At the seminar, Assoc.Prof. Kanitsorn Terdpaopong, Director of the International Accounting Program, Rangsit University, Thailand, and Dr. Nguyen Thi Phuong Dung, Hanoi University of Science and Technology (HUST), and the research team members including Dr. Nguyen Thi Huong Lien and MSc. Nguyen Thi Hai Ha, VNU - UEB shared research results on management accounting in Vietnamese and Thail enterprises.

Management accounting plays an important role in corporate governance because it is the part that provides financial and non-financial information to help managers not only plan, control, and operate business activities but also forecast and build long-term development strategies for their businesses. Management accounting is considered the key to helping businesses succeed in today fiercely competitive environment. In 1998, the International Federation of Accountants (IFAC) issued a model to identify management accounting development level (IFAC model) including 4 stages:

Stage 1 from 1950 and earlier: Management accounting mainly focused on methods of cost determination, product costing and internal financial control. Management accounting was considered merely a technical activity that helps a company achieve the set management objectives.

Stage 2 from 1960 to 1965: Management accounting focused on providing information for a business’s planning and control. At this stage, management accounting developed a step further, from merely a technical activity to a low-level management activity.

Stage 3 from 1965 to 1985: Management accounting focused on reducing waste in the use of enterprise resources in the context of the economic recession and the world oil price crisis in the 1970s, and strong global competition in the 1980s due rapid science and technology development.

Stage 4 from 1995 to present: This period marked the explosion of the internet and the globalization, creating fierce competition and greater risks in business activities. In this stage, management accounting focused on creating value for a business through the effective use of resources and application of science and technology.

 

Currently, in Vietnam, studies that adopt the IFAC model to determine management accounting and determinants are limited. Therefore, the research team conducted a survey of 173 manufacturing and trading enterprises in Vietnam, including 92 manufacturing enterprises (53.2%) and 81 trading enterprises (46.2%). 8%). The majority of respondents (82.7%) are members of finance and accounting divisions and director boards.

The survey results show that the most widely applied cost management accounting methods in manufacturing enterprises are "Standard production cost accounting" (average value is 3.62) and “Simple/Full Production Cost Accounting” (mean value is 3,207). The methods applied by very few enterprises are “Activity-based cost accounting” (mean value is 2,337) and “Target cost accounting” (mean value is 2,196). These results are similar to the results of previous studies such as Nguyen & Aoki (2014). For commercial enterprises, the most widely applied method is, respectively, "Classification of costs into variable and fixed costs" (average value is 2,259), "Accounting for production costs according to norms" and “Proportion of pre-allocation of manufacturing overheads”. Similar to manufacturing enterprises, modern methods are used at a very low rate. Therefore, compared with previous studies, Doan et al (2011), Nguyen & Aoki (2014), can determine that traditional costing methods are commonly used in Vietnam.

Regarding estimation methods, the survey results show that the highest adoption rates are "Cost estimation" and "Revenue estimate", respectively. The percentage of enterprises applying these methods is higher than the afore-mentioned cost accounting methods with the average value reaching above 4.0. Management accounting carried out by Vietnamese manufacturing and trading enterprises focuses on planning and controlling costs. Terdpaopong et al (2018) also show that “Cost estimation” is the most widely applied among the types of estimates in Thai enterprises.

Regarding performance evaluation, “Analysis of financial indicators” is the most widely applied (mean values are 3,609 and 3,235 respectively). Meanwhile, modern methods such as “Balanced Scorecard”, “Comparison with other companies/industry average”, and analysis of non-financial indicators are applied at a relatively low level.

Regarding information provision for decision making, “Profitability analysis” is the most widely applied (mean value is 3,609) in manufacturing enterprises. It is followed by "Profit analysis of product group" and "Cost - volume - profit analysis". For commercial enterprises, the highest adoption rates are “Product group profitability analysis” (average value is 3,123) and then “Profitability analysis” and “Cost analysis” cost - volume - profit".

Regarding strategic management accounting, the application rate is lower than cost accounting methods, estimation, performance evaluation, information provision for decision making. In general, enterprises in the survey sample hardly applied strategic management accounting.

Research results show that most of the management accounting of the surveyed enterprises (69.3%) is in the first two stages of the IFAC model. Only 30.7% of the enterprises applied modern management accounting methods in stages 3 and 4. Management accounting applied in enterprises today is highly traditional.

As for management accounting determinants, the research results show that product characteristics, managers’s needs for information, accountants’ qualification, business environment stability, enterprise age, and enterprise size have a positive impact on the level of management accounting of Vietnamese manufacturing and trading enterprises.

Based on the above survey results, the study proposed some recommendations to promote the application of strategic management accounting in Vietnamese enterprises as follows:

Firstly, raising awareness of the management of the significance of strategic management accounting.

Strategic management accounting Information helps the management determine strategy and strategic position of the enterprise on the basis of considering internal and external factors such as the competitive environment (Simmond, 1981). Strategic management accounting information helps the management planning, estimating production and business, cash flow, or environmental management cost… At the same time, strategic management accounting information also helps managers make decisions such as: Which investment option to choose? How should product be changed? What price can be competitive? Which production activities do not harm the ecological environment? In addition, strategic management accounting information also helps the management monitor based on analysis, comparison, and synthesis so as to control and review the enterprise’s operations. Therefore, businesses need to raise awareness about benefits that strategic management accounting brings to help businesses improve operational efficiency, differentiate themselves from competitors and minimize threats of replacing their products.

Second, building software to support management accounting and improving technology application

The technological revolution is taking place more and more strongly with the introduction of modern machinery and equipment, which requires Vietnamese enterprises to actively modernize their production processes and apply advanced technology. In particular, this technological revolution is considered as a driving force leading to a shift from traditional management accounting to strategic management accounting. The research results explained the role of technology as a factor that positively affects the strategic management accounting. When the management accounting information is supported by a specialized software, it will help shorten information collection and process, thereby quickly providing information for administrators’ decision making. Therefore, administrators need to step up investment in facilities, apply information technology to strategic management accounting, and select modern software that can integrate many functions.

Third, strengthening the decentralization of management and enhancing responsibility accounting

The survey results and the synthesis of previous research results show that the higher the hierarchical structure of management, the greater the degree of application of strategic management accounting. Decentralization for lower-level managers in decision-making helps businesses respond more quickly to changes in the business environment and seize opportunities in the market. Therefore, Vietnamese businesses need to strengthen management decentralization, clearly define the rights and responsibilities of each individual, divisions. When the organization makes decentralization to the right people and of the right jobs, it will create conditions for employees to be maximized, and increase responsibility, enhance the enterprise’s performance.

Fourth, strengthening coordination and information exchange across divisions

The research results show that strategic management accounting helps businesses improve operational efficiency, which is also the goal that businesses all aim for when developing strategies. In order for the implementation of strategic management accounting to be effective, enterprises need to build a mechanism for information exchange across divisions. To prepare strategic management accounting information such as resources mobilization and use, production and business estimates, cost - volume - profit reports, performance evaluation reports, etc., it is necessary to have a close coordination within the enterprise to ensure the quality and accuracy of the disclosed information.

Fifth, improving management accountants’capabilities

The qualification of accountants and management accountants is the most important factor for the success or failure of the implementation of strategic management accounting. According to the research results, although strategic management accounting is no longer a new concept in Vietnam, for newly established enterprises or small and micro enterprises, this concept is still quite unfamiliar requiring management accountants to regularly update their knowledge, professional qualifications by attending training programs for chief accountants, financial directors, or certifications namely ACCA, CIMA, CMA... Today, the development of the scientific revolution 4.0 and the coming 5.0 will lead to an inevitable change from traditional accounting tools to modern tools of strategic management accounting. Therefore, enterprises can cooperate with prestigious educational and training institutions on management accounting to organize training courses, update knowledge, and training courses on strategic management accounting.

In summary, this study contributed an empirical result on management accounting of manufacturing and trading enterprises in Vietnam as well as determinants through the use of the IFAC model. The research results help the management to learn the level of management accounting in their organizations, thereby planning to deploy and apply modern and appropriate management accounting methods. State management agencies and professional associations, researchers are provided with an overall picture of management accounting in Vietnam based on international scales, as well as a better understanding of those determinants so as to issue suitable policies for the development of strategic management accounting in Vietnam.