Navigating a Winding Mountain Road: The Status of Management Accounting in Iceland Páll Ríkharðsson, PhD, SAS Institute A/S, Denmark, Reykjavík University, Iceland Þorlákur Karlsson, PhD, Reykjavík University
Closing the knowledge gap bution margin accounting, and full-cost When looking at internal control, this The management accounting system in accounting. seems to be an unaddressed issue in the a company is, in short, the most impor- • Characteristics of budgeting practices, majority of Icelandic companies. Internal tant management information system the the budgeting process, and uses of control has usually not been documented, manager has at his or her disposal. It is budgeting information. verified, and approved by top managebroadly defined as the collection of sys- • How quality of accounting information ment; there are few objectives for control tems, processes and tasks concerned is ensured, risk management, and activities; and few companies test conwith the provision of financial and non-fin- planning practices, as well as the safe- trols and even fewer have defined key ancial information to managers enabling guarding data and use of internal con- controls. them to make and follow up on business trol frameworks. decisions that are aligned with corporate • What performance measurement Most managers use financial indicators or strategy. frameworks are in use, performance results from the financial accounts as the indicators used, and characteristis of primary performance indicators. There is Although management accounting prac- performance reporting systems. relatively little use of non-financial perfortices have been researched in various • Use of information technology in reg- mance indicators such as customer satiscountries, no comprehensive research istration, processing, and reporting of faction, process efficiency, or quality. Not to date has focused on what character- accounting data and decision support. many Icelandic companies use integrated izes management accounting practices in approaches to performance measureIcelandic companies, the development of The results of the ICEMAC survey ment such as the Balanced Scorecard or this practice, how this practice compares After analyzing the answers, several main Business Excellence models. to other countries, what methods and characteristics stand out regarding the tools are being applied, and how informa- practice of management accounting in Regarding the use of information technotion technology supports management Icelandic companies. logy to support management accounting, accounting. The ICEMAC project was these systems seem to be focused on conducted to close this knowledge gap. Regarding cost accounting practices, the registering and processing transactions. majority of Icelandic companies use con- Few companies use data warehouses, The methodology of the ICEMAC tribution accounting to account for direct business intelligence, and analytical sysproject costs and use volume-based allocation tems to improve decision-making. There The overall methodological approach was methods for the allocation of indirect also seems to be little focus on integratbased on first reviewing existing knowl- costs. Few companies use allocation ing information systems with the majority edge found in the literature, second on- methods such as Activity-Based Costing of respondents, not defining their inforidentifying issues and concepts via in- or full-cost accounting methods. mation systems as integrated systems. depth interviews in selected companies, and third on mapping current state-of-art Budgeting as a practice is limited in the Interpretations of the results and development in a large-scale ques- majority of Icelandic companies to finan- The results can be interpreted and extionnaire survey. The survey was conduct- cial budgets and sales budgets and only plained in many ways. However, looking ed in July 2008 amongst the 300 largest for one year at a time. Operational plan- at the characteristics described above, companies in Iceland and resulted in a ning cycles such as stock planning, raw some issues stand out. response rate of 68%. Respondents were material planning, and human capital mostly Chief Financial Officers and Chief planning are neither common practice First of all, relying on contribution acExecutive Officers. nor linked these to the financial budgets counting and volume-based allocation in any systematic manner. Even in some methods could lead to flawed information The questionnaire survey primarily manufacturing companies, for example, in companies where indirect costs are a included questions on: raw material plans, stock forecasts, and significant part of the total costs of the • Use of cost accounting frameworks assets forecasts seem rare. company. This could lead to difficulties in including variability accounting, contriassessing what products and customers
42 Háskólinn í Reykjavík | Maí 2009 | hr.is