Question

Critically discuss the following quotation:
ABC (activity- based cost) information, by itself, does not invoke actions and decisions leading to improved profits and operating performance.... For ABC systems to be effective, every-one in the company— from top management to operating personnel— must view them as cost management tools rather than as accounting tools. To achieve this objective, the accounting or finance department must relinquish ownership of these systems to the users. If accounting or finance fails to understand this key point, then ABC is unlikely to succeed. . . . While traditional systems are the property of accounting and are used to support the financial accounting process, successful ABC systems are owned by the functions and are designed to support the needs of cost management, not financial accounting. The result is a reduction in the role of accounting in the management of costs. [M] ost companies that implement ABC systems run them in parallel to their financial accounting systems. Parallel systems remove the risk of compromising the cost management capabilities of ABC to accommodate financial accounting rules and regulations. 13



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  • CreatedDecember 15, 2014
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