The competitive environment for companies is steadily becoming more challenging and demanding. Large planned company take-overs as recently announced from multinational corporations like for instance MITTAL STEEL or E.ON AG indicate the demand for more sophisticated and advanced management accounting information in order to react properly on the external market pressures worldwide. Multinational companies regularly have to cope with different institutional environments, management practices, techniques as well as cultural understandings between the respective countries.
While in this context the field of financial accounting has already attracted much attention from the academic world on a comparative nationwide level, the area of internal management accounting has largely been a concern of approaches focussing on single countries only. These approaches have been analysed by national academic scholars and as a consequence also influenced the practices in other countries. However, in order to initiate a discussion and to highlight best practices, novelties and inefficiencies in the management accounting world, a sophisticated comparison drawing on the differences and similarities in the observed countries has only recently been conducted in the management accounting literature.
Furthermore, different labels, in different languages, are used to refer to management accounting around the world. The relatively young discipline of comparative management accounting tries to fill this gap in management accounting research by determining the degree of diffusion of applied concepts and practices in different countries.
The present paper analyses the different characteristics of management accounting in Germany, the United Kingdom (U.K.) and the United States of America (U.S.).
The paper is organized as follows. Chapter 1.2 explains the choice of the selected countries and the methodological proceeding. Afterwards, chapter 2 introduces the general concept of comparative management accounting and reviews the current academic literature. Based on the terminological specification of nationwide diverging definitions of management accounting labels, the following chapter 3 describes and compares the main aspects and characteristics of management accounting in Germany, the U.S. and the U.K. Chapter 4 discusses current developments in management accounting. Finally, the concluding chapter 5 summarizes the findings.
Table of Contents
1 Introduction
1.1 Motivation and goals of this study
1.2 Methodological explanation
2 Principles of comparative management accounting
2.1 Comparative management accounting
2.2 Management accounting versus controlling
2.2.1 Management accounting terminology and definitions in the U.S. and the U.K.
2.2.2 Management accounting terminology and definitions in Germany
2.3 Determinants and factors of influence for differences in management accounting
2.3.1 Culture as influence factor in management accounting
2.3.2 Education, occupation and institutions of management accountants as influencing factors
2.3.3 Economic background as influence factor
2.3.4 Other potential determinants and factors of influence
2.3.5 Concluding remarks concerning divergence versus convergence of management accounting
2.4 Literature review
3 Comparison of relevant management accounting aspects
3.1 Tasks and objectives of management accounting
3.1.1 Objectives and target groups of management accounting
3.1.2 Long-term versus short-term goals
3.1.3 Management accounting versus financial accounting
3.1.4 Fields of activity for management accountants
3.1.5 Tasks of management accountants
3.2 Management accounting systems and instruments
3.2.1 General ledger versus two circle system
3.2.2 Management accounting instruments
3.3 Organisational integration of management accountants in the corporation
3.3.1 Hierarchical level of management accountants within the corporation
3.3.2 Interrelations and connections to adjacent departments
3.3.2.1 Organisational connection to the finance department
3.3.2.2 Organisational connection to the cost accounting department
3.3.2.3 Regional separation of financial and management accounting departments
3.3.3 Size of management accounting departments
3.4 Role of the Controller in the observed countries
3.4.1 Role of management accountants in Germany
3.4.2 Role of management accountants in the U.K. and the U.S.
4 Current developments in international management accounting
4.1 Approach of management accounting and financial accounting in Germany
4.2 German influence on Anglo-Saxon management accounting
5 Conclusion
Objectives and Topics
The primary goal of this research is to analyze and compare the fundamental characteristics, roles, and institutional frameworks of management accounting in Germany, the United Kingdom, and the United States, investigating whether these national practices are converging or diverging due to global competitive pressures and recent developments.
- Comparative analysis of German 'Controlling' vs. Anglo-Saxon management accounting.
- Examination of the influence of national culture, education, and institutional background on accounting systems.
- Evaluation of the organizational integration and hierarchical roles of management accountants.
- Analysis of the harmonization of internal and external accounting standards (e.g., 'Biltrolling').
- Investigation into the convergence versus divergence of management accounting practices.
Extract from the Book
3.2.1 General ledger versus two circle system
The handling with data used for external and internal accounting needs is solved in different ways in the observed countries. As in Germany management and financial accounting are separated to a high degree (as stated above), the systems of management and financial accounting are separated as well by the use of a ‘two circle’ concept (WÖHE 2000, page 853; Messner 2003, page 249).
On a first view a dividing line between financial accounting and management accounting exists in the U.S. and the U.K. due to the different tasks and accounting goals. Contrary to Germany, proximity between internal and external accounting can nevertheless be observed in the sense that no two completely separated data bases are used in the Anglo-Saxon countries (KAHLE 2003, page 775). More concrete, a common data base named ‘general ledger’ is commonly applied (KAHLE 2003, page 775).
While this general ledger system is widely accepted on an international level, the two circle respectively dual cost system is still the most commonly used system in Germany. Financial and cost systems are run independently in Germany, “with a reconciliation module provided to articulate between the two sets of statements at the end of the year when financial statements are prepared” (KAPLAN & ATKINSON 1998, page 8). In the following, characteristics as well as consequences and differences that arise due to this variation will be discussed.
Summary of Chapters
1 Introduction: Summarizes the study's motivation regarding global competition and outlines the methodology for comparing management accounting across Germany, the U.K., and the U.S.
2 Principles of comparative management accounting: Introduces the concept of comparative management accounting and reviews influential factors like culture, education, and economic backgrounds.
3 Comparison of relevant management accounting aspects: Compares tasks, systems, organizational integration, and roles of accountants in the observed countries.
4 Current developments in international management accounting: Examines emerging trends such as the integration of financial and management accounting, known as 'Biltrolling', and the influence of German practices on Anglo-Saxon contexts.
5 Conclusion: Synthesizes the core findings, noting that while national differences remain, a converging trend is observable through the exchange of best practices.
Keywords
Comparative management accounting, Controlling, General ledger, Two circle system, Biltrolling, Anglo-Saxon, Germany, Management accountant, Corporate governance, Convergence, Divergence, Financial accounting, Internal cost management, Organizational integration, Controller.
Frequently Asked Questions
What is the core focus of this research paper?
The paper provides a comprehensive comparative analysis of management accounting practices in Germany, the U.K., and the U.S., focusing on institutional, terminological, and operational differences.
What are the primary thematic areas covered?
Key themes include accounting terminology, hierarchical positioning of management accountants, organizational systems (General Ledger vs. Two-Circle), and the influence of national culture and education.
What is the ultimate objective of the study?
The objective is to determine if management accounting practices across these countries are moving toward convergence or maintaining divergence amidst globalization.
Which methodology is employed in this research?
The research uses a framework to categorize academic literature, followed by a comparative analysis of institutional settings, tasks, and empirical findings on organizational structure.
What does the main body of the text address?
It details the functional tasks, organizational integration, reporting systems, and the evolving professional role of the controller/management accountant in each of the three countries.
How would one characterize the key keywords?
The keywords reflect the intersection of national accounting traditions, professional roles, and the global trend toward benchmarking and harmonized practices.
What is 'Biltrolling' as described in the paper?
Biltrolling refers to the current development in large German multinational corporations of integrating financial and management accounting data, effectively blurring the lines between these traditionally separate spheres.
Why is the General Ledger system significant?
The General Ledger system is the common standard in Anglo-Saxon countries, representing a more integrated approach where financial and management accounting access a shared data base, contrasting with the German dual-circle system.
How does the role of the 'Controller' differ by country?
In Germany, the role is often characterized as a coordinator and provider of decision-relevant information, whereas in the U.S. and U.K., controllers are typically more integrated into operational decision-making and linked to the finance department.
- Quote paper
- René Stienemann (Author), 2006, Comparative Management Accounting, Munich, GRIN Verlag, https://www.grin.com/document/83026
