Winter 2007


Table of Contents



An Inconvenient Truth about Accounting

By Janek Ratnatunga


The Kyoto Protocol is the first step towards stabilising global emissions of carbon dioxide (CO2). But what is carbon trading and is the accounting profession ready to provide the decision information required to limit the enhanced greenhouse effect?

This paper considers the impact of the Kyoto protocol on countries, business entities and individuals, and if the accounting profession is ready to meet the challenges brought about as countries enact carbon trading legislation. An inconvenient truth is that the measurement, reporting and assurance frameworks developed in financial accounting and auditing actually hinders the role the profession can play in reducing global warming. Management accounting reporting has no such constraints.


Global Warming, Carbon Emissions, Carbon Financial Accounting, Carbon Auditing, Carbon Auditing and Assurance, Carbon Financial Reporting, Kyoto Protocol, Accounting for Greenhouse Effect


A Framework for Unused Capacity: Theory and Empirical Analysis

By Kashi R. Balanchandran , Shu-hsing Li and  Suresh Radhakrishnan


Firms build excess capacities in fixed cost resources for two purposes – to accommodate uncertainty and to plan for potential growth.  Fluctuating demand and internal processing times result in uncertainty, while lead times in building fixed resources result in excess capacities being built to meet future growth in demand. These give rise to unused capacity costs. Our objective, in this paper, is to develop a framework that disaggregates unused capacity cost into categories of unused capacities, and thus provide decision-relevant information for management to plan and manage excess capacity. In addition, this paper uses the data from an international semiconductor company to investigate the usefulness of the proposed theoretical framework and test its implementation.


Unused Capacity, Excess Capacity, Excess Capacity Drivers, Bottlenecks, Resource Allocation, Semi-conductor Industry, Product

Posting Budget Participation’s Influence on Budget Slack: The Role of Fairness Perceptions, Trust and Goal Commitment

By Adam S. Maiga* and Fred A. Jacobs**


This research uses structural equation modelling to investigate a comprehensive model of the relationships between budget participation, procedural fairness, distributive fairness, trust, goal commitment and managers’ propensity to create slack. To this end, data from 163 U.S. individual managers were used for the study. The results show that budget participation impacts both procedural fairness and distributive fairness which, in turn, affect trust. Also, both procedural fairness and trust are found to have a significant impact on budget goal commitment which, in turn, negatively influences managers’ propensity to create slack. Further analyses indicate that the direct relationship between budget participation and manager’s propensity to create slack was insignificant, which suggests that fairness and goal commitment mediate the relationship between budget participation and manager’s propensity to create slack. The applied implications of this study, especially in relation to individual reactions to being ‘laid-off’, are also discussed.


Budget, Distributive Fairness, Procedural Fairness, Trust, Goal Commitment, Budget Slack

Information Technology, Decision Support and Management Accounting Roles

By Ian Beaman and Bill Richardson


Commentators have observed that unless management accountants adapt to developments in IT they risk being reduced to a subordinate role. This paper reports on the results of a longitudinal survey: specifically two surveys of management accountant members of CPA Australia and ICMA spanning an eight year period.  These surveys (CPAs in 1997 and ICMAs in 2005) were aimed at assessing the change in their roles as a result of IT developments.  The paper investigates the possibility that accounting functions within organisations are becoming restricted to the areas of financial reporting and transactions processing, rather than decision support and problem solving.  The findings of both studies show that management accountants perceive they spend on average only a third of their time on the latter types of management accounting activities.  The paper also identifies the specific IT skills necessary for decision support systems and discusses how such skills should be incorporated in accounting education programs.


Product Cost; Overhead Rate; Denominator Capacity; Budgeted Capacity; Practical Capacity; Normal Capacity


The Single Global Currency: Common Cents for the World – by Morrison Bonpasse

Reviewed By: Ratnam Alagiah

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