Summer 2004





Empowerment Accounting: The Role of Financial Statements in the Shift from the Informational to the Influential Paradigm


The paper argues that the rapid changes and the intensity of competition in the global economy make new types of measurements necessary for national competitiveness and economic progress. The accounting profession needs to identify what those measurements will be, devise ways to capture the required information and report them reliably to interested parties. They must then link those measurements to the organisation’s rewards system. Finally, they must train the employee category of interested parties to understand the reports and be motivated by them. This requires research into what the subject-matter of accounting should be within an “informational-era” global economic paradigm, and how to extend and disseminate this subject-matter across the entire organisation in order to influence and empower its employees. This need to have measures that have a ‘motivational’ impact is seen as the emerging ‘influential’ economic era.

Janek Ratnatunga

Page 1


Contemporary Accounting Innovations in Australia: Manufacturing versus Service Organisations


Researchers, focusing on the adoption of contemporary accounting innovations, postulate that different categories of organisations will place different emphasis on particular drivers when adopting the same accounting innovation, depending upon their perception of key performance indicators (Lee and Chan, 2003), the ownership of the innovation by influential individuals within the organisation (Brown, Booth and Giacobbe, 2001) and other enabling conditions (Cagwin and Bouwman, 2002). This suggests that particular organisational classifications may have a predisposition towards the adoption of particular innovations based on their perception of their business world.


This paper tests this proposition by comparing the adoption of specific accounting innovations between organisations within the manufacturing sector and organisations within the service sector. The study tests two hypotheses, first that different types of organisational classifications have a predisposition towards particular accounting innovations, and second, different drivers provide different motivators for the adoption of accounting technologies within different organisational classifications. In total 288 responses from organisations classified as either manufacturing or service were considered.

The results provide some support for the hypothesis that different organisational fields will rely on different elements of adoption for different accounting innovations. However, the second hypothesis, that different drivers provide different motivators for the adoption of accounting innovations, was not supported.





Accounting Innovation; Value-based Management (VBM); Total Quality Management (TQM); Balanced Scorecard (BSC); Activity-based Costing (ABC); Activity-based Management (ABM)

Paul Preda and Ted Watts

Page – 17

Ethical Decision Making on Various Managerial Accounting Issues



This study examines five managerial accounting issues that have ethical implications. These issues are based on situations described in managerial accounting textbooks. To induce truthful responses, an approach called the randomized response technique is used. With this technique, estimates are obtained for responses to sensitive questions relating to the five issues. Results ranged from 9 percent to 51 percent of participants making decisions that are at least questionable from an ethical perspective.




Accounting Ethics; Randomized Response Technique; Management Accounting

Arnold Schneider

Page – 29

A Survey on Popularity of the Direct Method of Cashflow



The debate on presenting a statement of cash flows using a direct approach or indirect approach is long standing. In the United States, accounting standard SFAS 95 provides an option to use either approach, though most US business enterprises use an indirect approach. In contrast, the Australian Accounting Standard AASB 1026 allows only the direct method with a note reconciling net profit to net operating cash flows. The purpose of this study is to examine perceptions of which reporting method is more useful to the decision-making process of users of financial reports. The user groups selected for survey are managers, shareholders, employees, suppliers, and customers. Results demonstrate that overall the direct method of reporting cash flows is considered superior to the indirect method by these user groups. Managers and shareholders respond that the direct method helps them to understand cash flow data, satisfies their needs for decision-making purposes, and is relevant and reliable. On the other hand, only a small majority of employees, suppliers and customers believe that the direct method is superior to the indirect method of reporting cash flows. Further, a majority of employees and customers had neutral feelings towards the relevance and reliability of either the direct or indirect methods of reporting cash flows.




Cash Flows; Decision Making; Financial Performance; Liquidity

Mahendra K. Goyal

Page – 41

Accounting Issues in Electronic Commerce: An USA
Perspective Regarding Valuations and Implications for
Corporate Governance
Mahesh Raisinghani, Bill Shoemaker and
Lawrence Schkade

Page – 53

Management Accounting, Racism, Division and Exploitation: The Case of the Malaysian Plantations Industry



Can accounting be used as a tool by an exploitative community, to meet their ends? Fleischman and Tyson (2000) have argued and provided evidence that accounting has enabled a racist plantation regime. More recently Burrows (2002) raised questions relating to this original thesis and provided some further historical evidence with a transaction-cost explanation. This paper provides an alternative explanation to the use of accounting within plantations, which is that of division and exploitation, and seeks to clarify the role of accounting in plantations, using the case of Indians in West Malaysia. The paper explains how the existence of and the use of accounting and its tools, particularly found in management accounting, such as budgets, enabled an exploitative regime. It is argued that dividing and exploiting one group of people for the benefit of another is one way by which a divided society expresses itself.




Accounting Racism; Transaction-cost Economics; Economic Development; Division and Exploitation; Malaysian Plantations

Ratnam Alagiah

Page – 69

Book Reviews

Research Methods in Accounting by Malcolm Smith
Reviewed by Ratnam Alagiah

Page – 81

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