Literature Review

Literature Review

1. Taxanomy

   • Traditional vs ABC
     • ABC in banking
       • In summary, when applied to financial services, ABC introduces accounting into a management culture that had previously been used to systems of control built around personnel and customary operational practices. Although there may have been instrumental reasons for trying to increase the cost-consciousness of the bank, the specific choice of ABC did seem to be influenced by the imitation of other banks and other departments in the bank together with the easy availability of ABC packages. ( ABC and organizational change: An institutional perspective)
       • PM
         • Innes and Mitchell (1997) also refer to these new accounting data as leading to a series of changes in managerial behaviour, for example, cost-conscious new service design decisions and customer related strategies.
       • DM
         • One technical justification for introducing ABC is that financial services have no requirement for costing for external financial reporting or stock valuation. Thus in banking, costing has been introduced explicitly for decision-making and control purposes (Malmi, 1997; Cooper and Kaplan, 1998; Horngren et al., 1999). ABC is well suited to the financial sector as many service costs are process rather than volume related (Innes and Mitchell, 1991).
         • Timelines
           • Manager compalined received data with 3 week delay which was to late to eliminate variance and ensure a unitform growth. - Problem with Timeliness (Power, Discourses and ac...)
         • Customer profits
           • It is claimed that ABC can be used as part of the strategicmanagement process through understanding cost behaviour and analysing the profitability of customers and the newly created products (Brignall, 1997)
       • Implementing ABC in banking (contengicny theory)
         • However, more recent studies have identified important behavioural and organisational factors in ABC implementation: top management support, integration with competitive strategies, integration with performance evaluation and compensation, training, adequacy of resources, non-accounting ownership, and consensus and clarity of objectives (Shields and Young, 1989; Shields, 1995; Shields and McEwen, 1996; Foster and Swenson, 1997; Malmi, 1997; McGowan and Klammer, 1997; Krumwiede, 1998a, 1998b; Friedman and Lyne, 1999; Innes et al., 2000).
         • Pitfalls of implementing
           • ABC team faced significant technical difficulties, including resources allocation, lack of staff time, choice of activities, and the selection of cost drivers, that can influence the successful implementation of an ABC system (Power, discourses and accounting change)
         • Why adopt ABC
           • Commpetition
             • Increased competition in the financial services sector in the 1980s and 1990s had forced UK banks to become more explicitly profit and cost conscious (Innes and Mitchell, 1997).