Comparative Analysis of Management between Australia and Japan - Case Study Example

MAC GROUP ASSIGNMENT An overview of the Journal Article The journal article is about a comparative analysis of management between Australia and Japan through the use of empirical data. This article has used the two countries to exhibit the effect of cultural changes on accounting. Australia has been used to represent western countries while Japan represents Asian countries. Empirical data obtained from the Journal article indicates that Japan was focused on cost and management accounting while Australia was focused on financial accounting based on external reporting. Budgeting between the two countries is a very pertinent management tool in planning and product cost control. However, it was observed that Australia prepared budgets on an annual basis while Japan prepared budgets on a bi-annual basis. Other different types of management functions highlighted through differences in the two countries include differences in production systems and types of costing methods. Maintenance of inventory and investment appraisals between the two countries has also been subjected to cultural differences. This paper bridges the gaps in management account thinking through an analysis of the different managerial management accounting practices from the two countries respectively. These management accounting practices are responsible for management and control within the two various countries and facilitate effectiveness and efficiency within the two (Chapman, Hopwood and Shield, 2009). Summary of the Journal The journal is about a comparative analysis of management practices between the Australia and Japan through the use of empirical data. The empirical data in this journal has been obtained through the findings of a questionnaire survey conducted between the two countries in 1997. The survey revealed a number of the significant pertinent differences between the two nations. The journal established that the different management accounting practices in Japan were as a result of cultural influence while in Australia the influence resulted from their education system. The primary difference between the two countries was on decision-making. In Japan, decision-making was a collective responsibility and affected all the employees while in Australia decision-making were an individual responsibility (Drucker, 1971). The other factor with a significant impact on the different management accounting practices in the two countries is the nature of their management accountants and the specialization requirements. The Japanese system which terms its management accountants as cost accountants are specific and thorough in its educational accounting practices. On the other hand, the Australian system is not specific and not through on the educational accounting practices but rather based on generalization (Voss and Blackmon, 1998). The questionnaire survey found out several significant differences between the two countries in terms of management accounting practices. Management accounting tools such as budgeting are in both countries although differently. In Japan, Budgeting is done on a bi-annual basis, and its primary focus is target costing. In Australia, budgeting is done on an annual basis, and its primary focus is on activity based costing. Cost accounting data between the two countries is for different reasons. These reasons include product costing, budgeting, inventory valuation, management control, cost control and simplification of bookkeeping. The various types of accounting management practices between the two countries are investment appraisal, overhead allocation, inventory levels, performance evaluation, product costing and costing systems (Modell, 2005). A critical assessment of how the journal meets its aims and establishes its findings The primary objectives of the used journal were to make a comparative analysis of management accounting practices in Australia and Japan. Through the issuance of questionnaires to large manufacturing companies in both Australia and Japan, empirical data is obtained. The questionnaire results are then analyzed to reveal differences in management accounting practices of the two countries. Furthermore, the questionnaire is addressed to different types of companies facing different competitive levels as well as employee numbers. A large percentage of the variables studied using the questionnaire survey was related to the various aspects of management accounting and control. Examples of these factors included the different budgeting processes, cost control tools, and investment appraisal methods among others. On a comparative basis, the differences in the management accounting practices between the two countries are established analytically. The results of the questionnaire survey coupled with other relevant literature are used to build and support the journal findings respectively. The results of research are with respect to the number of firms that responded to the questionnaires rather than the total number of issued questionnaires. The method above helps in getting more relatively accurate averages and percentages unlike the inclusion of unanswered questionnaires in the data set (WIjewardena and Zosya, 2005). A comparison of Journal evidence used evaluating their respective contributions to the subject. The different forms of journal evidence used include an analysis of the various management accounting tools. The journal evidence states that Western countries focus on cost control tools at the manufacturing stage while Japanese manufacturers focus is based on cost planning and reduction at the product design stage (Howell, 1989). Budget which is a very pertinent management accounting tool has been used in the journal. In the budgeting process, Australian companies focused on an annual budgeting process while Japanese companies focused on bi-annual budgeting. The journal has also further identified the different uses of management accounting information. These are decision-making, budgeting and budgetary control; cost management, product pricing and performance evaluation among others. Furthermore, the uses of cost accounting data include budgeting, inventory valuation, product costing and cost control among others. Management accounting information, as well as cost accounting data, are essential for controlling the allocation and use of a company’s resources. Through an analysis of the two types of information above, the company can project its profitability and performance for the oncoming period hence ease of forecasting and analysis (Brimson, 2006). Another form of evidence exhibited in the journal is investment appraisal. Investment appraisal is in determining the investment’s performance output of the investment which goes ahead in determining whether the company is making profits or losses. Determination of inventory levels in a corporation is also considered a management accounting tool since various costs are associated with stocks through acquisition and carrying costs. On the other hand, the purchase of high inventory prevents firms from investing as funds are held up in inventories (Garrison et. al, 2004). Issues Arising that Would Benefit from Further Research and the Approach That Research Might Take The primary issues in need of further research are the relationship between accounting education plus experience and firm accountant’s innovation. The difference in the education practices between Japan and Australia could the major factors for the difference in accounting innovation. As evidenced in the article, a Japanese accountant is supposed to meet tertiary institution’s education then undertake three years unique experience to be declared an accountant. On the other hand, Australian accountants are only required to make tertiary education and then are considered accountants (Hiromoto, 1998). On a competitive level, Japan has been observed to outdo its competitors from the West majorly through innovation in the accounting practices over the years. Practices such as maintenance of no inventory and discounted cash flow in investment appraisal have given Japanese firms an edge over their western counterparts. More research is thus required to bridge the information gap between management accounting experience and its effect on professional practice (Kendall, Keith and Steen, 2008). Additionally, more research is required to bridge the gap in the relationship between Japanese accounting and the numerous cultural changes that have impacted the business environment. The unique company philosophies adopted by Japanese companies have also acted as pertinent management tools hence they could have an influence on their productivity (Takamura and Takamatsu). Interactions with staff With reference to management accounting for control, the group was able to interact with the head of the accounting department at Itochu Textile Company Dr.Sishiki and the accounting manager at Aristocrat gaming machine manufacturers Mr. Green. Itochi Textile Company is the largest textile manufacturer in Japan while Aristocrat is the most major manufacturing firm in Australia. The interaction between both staffs was through emailed questionnaires that were answered then sent back to us for analysis. The questionnaires highlighted the different accounting tools used for management control and their effectiveness and efficiency in attaining control. The various management accounting practices questioned the use and effectiveness of budgets, cost accounting data, investment appraisal and overhead allocation in achieving company control. Sishiki maintained that although they budgeted, they budgeted for a short term basis. He also maintained that standard costing had very little significance to their company. Sishiki also stated that Japanese company made very little use of discounted cash flow during investment appraisals. On his part, Mr. Green stated that they budgeted on a long term basis as well as focused on standard costing practices. Mr. Green acknowledged the use of discounted cash flow during investment appraisals. From the two interactions, it was evident that management accounting was pertinent to company control. Conclusion Management accountant has the role of supporting the decision-making process in an organization. The role is implemented through the collection, processing and communication of information. This information assists the management in planning, controlling and evaluating business processes alongside company strategies. In the majority of the organization today, management accounting plays a very pivotal role. In the majority of the organizations today, the top accountant is referred to as the controller and all accounting functions report to him. Through proper use of management accounting, information firms can make sound and effective decisions. Technological innovations and improvements also have their toll on management accounting as different methods of establishing management accounting decisions have come up (Takahashi, 2002). This journal article analyzes on a comparative basis the differences between management accounting practices between the Western countries and Asia through the use of Australia and Japan as respective representatives. This journal article has also found out that the cultural setup of the different countries goes ahead further to affect the managerial accounting practices in the given firm. In Japan for example decision is a collective responsibility while in Australia it is a personal responsibility. The cultural effect has significantly affected the education system as well as the decision-making system (Hiromoto, 1998). Reflective discussion of personal learning and development From the above article summary and interpretation of the journal with respect to management accounting control, as a student I can identify the different developments encountered in management accounting. Concerning the two countries, Australia and Japan one can identify the uses and significance of various accounting tools. Through a comparative check on the various management accounting practices such as performance appraisal, budgeting, and overhead allocations among others, one can choose the most appropriate methods of attaining the end results. The student also gets to understand that the different management control systems alongside the contingency theories involved. Furthermore, one knows how the various management controls affect the decision-making processes. From an accounting perspective, I have learned about the significance and uses of various management accounting tools. These include budgeting and capital investment appraisal (Voss and Blackmon, 1998). Through the use of activity-based management, I have been able to learn about the different methods of activity based activities alongside their advantages and disadvantages. These include activity based costing and budgeting. Furthermore, other managerial aspects of management such as cost management have also been highlighted. Cost management activities include cost commitment and target costing through product lifecycle and target costing respectively. The other subdivision of management accounting is the strategic management accounting practices. These include relevant non-financial information and potential benefits. These strategic management practices are quality costs and balanced scorecard respectively (Voss and Blackmon, 1998). All the articles submitted by the group members focused on the different aspects of management accounting. The articles contained either single or multiple management accounting aspects. The various aspects of management accounting include forecasting and planning, organizational control, interpretation of accounting data and communicating the information results to the relevant parties. The journal also exhibits the competitive advantages derived from cultural influences into the business environment. The cultural influences have affected the accounting field from education to working practices. Accounting students undergo different learning practices in Japan and Australia as a result of the cultural influence. In the workplace setting, decision-making and conduct are also significantly affected by cultural influences (Hiromoto, 1998). Reference List Brimson, J. A. 2006. “How Advanced Manufacturing Technologies are Reshaping Cost Management.” Management Accounting, (March): 25-29. Drucker, Peter F. 1971. “What We Can Learn from Japanese Management.” Harvard Business Review, (March-April): 110-122. Garrison, Ray H. and Eric W. Noreen. 1994. Managerial Accounting. Burr Ridge, 111: Richard D. Irwin Inc. Hiromoto, T. 1988. “Another Hidden Edge-Japanese Management Accounting.” Harvard Business Review, (July-August): 22-26. Howell, R. A. 1989. “Forward” to Japanese Management Accounting. (Edited by Y. Monden and M.Sakurai) Boston, Mass: Productivity Press: xix. Kendall, Keith and Adam Steen. 1998. “Just-In-Time Not So Timely: An Australian Perspective.” Australian CPA, (August): 39-41. Modell, S. (2005). Triangulation between case study and survey methods in management accounting research: An assessment of validity implications. Management Accounting Research, 16(2), 231-254. Takahashi, Fumiyasu. 1992. “Cost Accounting Practices in Japan.” Shogakushushi (Nihan University), 62(2):77-90. Takemura, N. and M. Takamatsu. 1987. “Accounting Education in Japan,” in Accounting and Financial Reporting in. &XX, (Edited by F. D. S. Choi and K. Hiramatsu). Wokingham: Van No strand Reinhold (UK) Co. Ltd: 196-217. Voss, C., and Blackmon, K. (1998). Differences in manufacturing strategy decisions between Japanese and Western manufacturing plants: the role of strategic time orientation. Journal of Operations Management, 16(2), 147-158. Wijewardena, H., and De Zoysa, A. (1999). A comparative analysis of management accounting practices in Australia and Japan: an empirical investigation. The International Journal of Accounting, 34(1), 49-70. Chapman, C., Hopwood, A. and Shields, M. (2009).Handbooks of Management Accounting Research. Burlington: Elsevier. Read More