Winter 2002





The Valuation of Capabilities: A New Direction for Management Accounting Research
By Janek Ratnatunga


Applying Marketing Science to Service Quality in Accounting

By Erwin Waldmann and V.C.S. Raghavan


Accounting firms operate in a competitive marketplace, consequently the quality imperatives and philosophies that currently apply to manufacturing are also relevant to service industries like professional accounting services.  This begs the question of how quality should be defined and what pedagogy should be used for achieving the goal of continuous quality improvement.  The service quality concepts are of particular relevance to management accounting due to its involvement in quality assurance in manufacturing.  This paper looks at some of the research and methodologies developed by Marketing Science which takes a customer perceptive in defining and measuring service quality, and applies one such methodology, SERVPERF, to a firm in the Accounting and Management Consulting industry.  In this study, data representing customer service quality (performance) perceptions and satisfaction with the services provided by the firm has been used to identify areas needing improvement. The study also identifies those areas in which the firm is effective in providing services. The results of this analysis appear to provide some support for conceptualising and measuring service quality as an attitude as suggested by Cronin and Taylor (1992).


Service Quality; Marketing – Accounting; SERVQUAL; SERVPERF.

Cartoon Graphics in the Communication of Accounting Information for Management Decision Making

By Malcolm Smith, Richard Taffler, and Lynda White


The content and presentation of information impacts on the efficiency of information processing and the effectiveness of management decision making.

The relative merits of schematic faces for the communication of multivariate information have been explored in a number of disciplines, having initially been developed by Chernoff (1971) to facilitate the clustering of geological samples on multiple attributes.  Existing studies in the financial environment suggest that they may be superior to conventional methods in both their communication and decision making qualities.  Continuing interest in their further development in the management accounting literature is evidenced by Hemmings (1996), Smith and Taffler (1996) and Gifford (1997).

This paper employs an innovative research design to demonstrate the relative usefulness of schematic faces in the failed/non-failed decision making context compared to accounting statements and financial ratios.  An optimum assignment of financial variables to facial characteristics is suggested, one which demonstrates the usefulness of schematic faces as a decision tool in the financial management environment.  Schematic faces are shown to be processed more quickly and with no loss of accuracy, compared to more traditional means of presenting financial information, findings which have implications for the way in which graphics are employed in the management decision making process.


Accounting Communication; Decision Making; Schematic Faces; Financial Reporting.

The Value Management Process: A Proposal for Linkage Between Shareholders and Managers

By Fábio Frezatti


Market Value Added (MVAâ)1 is an important metric for business in the global environment. Although it is probably the most complex metric available in attempting to provide a linkage between an entity and its performance in value management, there is nevertheless room to improve the usefulness of MVAâ, and to gain its attendant benefits. The business world is very careful in assessing the cost/benefit trade-off of any management tool.  This paper sets out to demonstrate that, in addition to current and long-term financial indicators adopted by an organization, MVAâ also can be added as an important tool. MVAâ, however, is still not well understood. Consequently, it is neither well tested nor widely adopted. To improve such understanding, this paper identifies different profiles of a company’s MVAâ at different times. By combining MVAâ and market value at any given time, four different profiles (or “corners” in a model) are proposed. These are conceptually defined and analyzed. To provide a reasonable perception of the figures, a combination of trend and sign is considered in the four selected “corners”. The classification of an organization’s results under any of these four alternatives contributes to a better understanding of the metric and provides useful information for shareholders and managers. Because this information is so important for companies—both as an indicator of management performance and as external information for stakeholders and managers—this paper advocates that it must be added to the traditional kit of financial statements (such as balance sheets, profit-and-loss statements, and cash-flow analyses).


Management Performance, Market Value, MVA®

Book Reviews

Cost Accounting – An Essential Guide Bill Richardson 71

By Bill Richardson

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