Within the framework of the "UEB - Research & Sharing" series of seminars, the "Managerial Accounting Evolution - Comparative Studies" seminar organized by the Faculty of Accounting and Auditing, VNU-UEB was held on May 23, 2022.
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.