Benefits and Barriers for Implementation of Activity - Dissertation Example

Ultimately, the paper concludes that activity-based costing could be extremely beneficial for Asian businesses. However, activity-based costing is virtually guaranteed to fail if it is imposed top-down or haphazardly. Barriers to implementation include different organizational and social cultures, different accounting norms and regulations, regulatory frameworks, fiscal policies, varying relationships to stakeholders, and other factors. If activity-based costing is to succeed, it must grow organically from the needs and behaviors of the organizations it is applied to.

Introduction As Asian countries' financial operations become more closely attuned with and leveled against the West, it is likely that the model of activity-based costing (hereafter known as ABC) will spread to Asian enterprises. This paper analyzes three countries: The Hong Kong SAR, Malaysia, and mainland China. These countries are immensely different from the West where activity-based costing is more common, with different fiscal policies, regulatory backgrounds, macro-economic statistics and behaviors, regional problems, resources, relations to customers and suppliers, and so forth.

Ultimately, activity-based costing could be extremely beneficial for Asian businesses. However, activity-based costing is virtually guaranteed to fail if it is imposed top-down or haphazardly.1.1: Definition Activity-based costing is defined by Rockford Consulting (1999) as “a method of allocating costs to products and services. It is generally used as a tool for planning and control. It was developed as an approach to address problems associated with traditional cost management systems, that tend to have the inability to accurately determine actual production and service costs, or provide useful information for operating decisions”.

Without ABC, managers can make errors in calculation and strategy, particularly in companies with many “products or services”. The idea is to attribute costs to activities more than products themselves.