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Into the light and engagement: 20 years of the AAAJ
Edited by Lee Parker, James Guthrie and Markus Milne
It is now 20 years since [8] Johnson and Kaplan (1987) wrote their influential critique of management accounting, Relevance Lost . It therefore seems a good opportunity to assess the validity of their critique and to examine how both management accounting practice and academic research have progressed over this period. My overall conclusion is very simple: I do not believe that "management accounting" is any longer a useful conceptual category for organizing research activity. Moreover, practitioners do not appear to believe that it is a very useful distinction to be made in practice either. Rather, we need to examine organizational routines and practices to better understand the functions they serve. One category of such routines might usefully be thought of as "control" procedures, which involve the processes that organizations engage in to help ensure that their strategies, plans and objectives are attained. Thus the category of "management control systems" or "performance management systems" provides a more focussed framework for analysis. This conclusion will be shown to have far reaching implications for the practice of academic research.
Relevance Lost
So to begin with Kaplan and Johnson. Essentially they argued that management accounting was past its sell-by date. At best, it had little usefulness or value in practice. At worst, it was counter-productive. And they gave many examples to support these conclusions. Most tellingly, they gave examples of managers promoting and expanding the sale of unprofitable products whilst neglecting to emphasize profitable products. How could the managers be so stupid? The reason, they argued, was that traditional cost and management accounting systems were sending them the wrong signals. They claimed if the costing were to be done properly (and by this they meant using activity-based costing) it would be seen that many products which traditional systems showed to be loss-making were in fact profitable, and vice-versa. The situation they identified was one where management accounting had stagnated. For many years there had been very little innovation and change; as a consequence management accounting techniques had become increasingly irrelevant to management practice.
However, the publication of their critique also marked a turning point. There has been more management accounting...