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MANAGERIAL AND COST ACCOUNTING PRACTICES – A ROMANIAN
OVERVIEW
Cardo
ú
Ildikó Réka
Babes-Bolyai University, Faculty of Economics and Business Administration, Cluj-Napoca
Pete
ù
tefan
Babes-Bolyai University, Faculty of Economics and Business Administration, Cluj-Napoca
Research theme – Globalization and technological changes generates complexity both in the
business environment and the accounting systems. Under these conditions managerial
accounting needs to learn new practices in order to become an active consultant of management.
Objectives – The main objective of this paper is to present how managerial accounting changed
over the years in Romania. We intend to present how the managerial accounting system is
implemented within Romanian organizations, to report the level of adoption of traditional
practices, tools and techniques, to identify to what extent contemporary managerial accounting
practices are implemented and used, and finally to identify whether managerial accounting
information is useful for business decisions.
Prior works – Over the years researchers from all over the world were interested in managerial
accounting changes and innovations, in managerial accounting practices, tools and techniques
adopted by organizations. On international level the study made by Pavlatos and Paggios (2009)
and on national level the study made by Jinga et al (2010) represents the starting point of our
study. Both research team conducted a study on managerial accounting practices and the utility
of managerial accounting information and found out that managerial accounting information is
useful for managers in the decision making process but traditional practices, tools and
techniques are used to “produce” this type of information.
Design/methodology – An empirical study was conducted in 2010 within Romanian accounting
professionals. A questionnaire was sent to a number of 1871 professionals members of The Body
of Expert and Licensed Accountants of Romania regarding managerial accounting practices,
tools and techniques adopted and implemented. Data obtained was processed and analyzed with
the help of descriptive statistics.
Results/findings – Romanian professionals consider that managerial accounting information is
useful for management in the decision making process but these information are” produced”
using traditional managerial accounting practices, tools and techniques are preferred by
Romanian organizations in the detriment of modern practices like activity based-costing or target
costing.
Implications – The results of our study represents a reference point for both researchers and
practitioners who are willing to carry on future research in the field of managerial accounting.
Originality/Value – This paper tries to fill a gap in the literature related to the Romanian
managerial accounting systems and practices. Moreover, it present an overview of managerial
accounting practices within Romanian companies giving the possibility to formulate suggestions
and proposals for its future development and evolution.
Keywords: managerial accounting, cost systems, practices, empirical survey, Romania
JEL classification: M41- Accounting and Auditing
485
1. Introduction
In today’s fast changing business environment, where knowing more and knowing it faster than
the competition is often the difference between surviving and not surviving, organizational
learning and knowledge management becomes a crucial organizational function (Huber 1998:1).
This organizational function leads to rethinking managerial practices and tightly related to this
reshaping the existing accounting systems especially the managerial accounting systems.
At international level there is an intensive debate on the changing role of managerial accounting
and managerial accounting professionals (Jarvenpa 2007). Researchers believe that managerial
accounting is being oriented from being a scorekeeper or a bean counter towards an increasingly
business oriented role (Burns and Baldvinsdottir 2005; Jarvenpaa 2007; Warren and Parker
2009). Moreover, they consider that new managerial accounting techniques like strategic cost
management, activity based costing, balanced scorecard or customer relationship management
enhance the business orientation of managerial accounting.
On national level, changes generated by globalization, intensive competition, the automation of
production processes penetrated more slowly, especially because of the political, social and
economical context of our country. That is why managerial accounting in Romania has had a
different evolution, has met different approaches, goals and objectives (Cardos et al 2010:58).
Anyway, managerial accounting information is essential in gaining competitive advantages, is an
indispensable instrument for the decision making and that is why, in order to survive, Romanian
companies are being forced to align to the new tendencies and technologies, to reinvent their
activity in accordance with market and customer needs (Jinga et al 2010).
These changes identified on international and national level encouraged us to do research in the
field of managerial accounting. Our objective is to present an overview of Romanian managerial
accounting in practice. We try to find answers to the following questions: How managerial
accounting evolved in Romania over the years? What kind of managerial accounting practices,
tools and techniques are preferred by Romanian practitioners? Is managerial accounting an active
advisor of the management in Romanian organizations? To what extent are managerial
accounting information used in the decision making?
2. Studies made in the field of managerial accounting – literature review
At international level there has been an intense debate on the role of managerial accounting in
recent years. Accountants, researchers and consultants have sought to develop different kinds of
advanced managerial accounting innovations and systems in order to cope with the needs of
today’s turbulent, global and technology-driven world (Jarvenpaa 2009). Because of these
changes researchers from all over the world tried to evaluate how managerial accounting research
developed (Hopper et al 2008); to identify how traditional or new managerial accounting
practices and techniques were adopted and implemented within organizations (Falconer 2002;
Gupta and Gunasekaran 2005; Hopper and Major 2009; Pavlatos and Paggios 2009).
A relevant study and starting point for our study was the one Pavlatos and Paggios made in 2009.
They tried to identify the managerial accounting practices implemented in the Greek hospitality
industry, especially to report the level of adoption and the benefits derived from traditional and
contemporary methods and techniques. Their findings show that traditional managerial
accounting is “very much alive and well” (Pavlatos and Paggios 2009:81). Traditional
techniques, such as standard costing, budgeting, are still widely adopted than recently developed
tools.
In Romania managerial accounting had a different and slower evolution; it was strongly
influenced by political and social regimes and by the development of the Romanian economy and
business environment. For many years managerial accounting was associated with cost
accounting and its main objective was to calculate, monitor, analyze and control production cost;
486
to plan and control the process of resource allocation through budgets and other management
tools (Cardos et al 2010). At the beginning of ’90 managerial accounting was reconsidered, we
witnessed a separation of the two components of the accounting system (financial and managerial
accounting). After 2000, influenced by the international literature, managerial accounting
experienced a modern approach. New functions and roles like providing relevant financial and
non-financial information to management, analyzing and monitoring internal business processes,
were associated to managerial accounting.
Over the years Romanian researchers tried to present the evolution of managerial accounting and
the managerial accounting profession in Romania (Albu 2006); tried to identify how managerial
accounting was perceived by researchers and practitioners (Cardos et al 2010); tried to establish
the level of adoption of traditional and contemporary managerial accounting tools and techniques
(Jinga et al 2010) and finally tried to evaluate the utility and usage of the managerial accounting
information (Glavan et al 2007; Jinga et al 2010).
The study made by Jinga et al in 2010 is similar with our study. They tried: (1) to establish the
attitude of the managers within Romanian companies towards the information generated by
managerial accounting; (2) to evaluate the utility and usage of managerial accounting information
in the decision making process; (3) to identify the specific instruments, tools and techniques used
for collecting and analyzing managerial accounting information. Their main conclusion is that
managerial accounting information is very useful for business development, for monitoring and
lowering costs or to increase the products quality. As for managerial accounting practices the
main conclusion is that within Romanian organizations traditional tools and techniques are still
used. Managers seems to prefer methods like global absorption method, job costing, direct
costing instead of activity based costing or target costing.
We can observe that the Romanian managerial accounting literature is poor, little is known
regarding the managerial accounting practice in Romania; there are only a few studies about the
role and function of managerial accounting, about the managerial accounting practices, tools and
techniques adopted by Romanian organizations in today’s changing environment, in the era of
globalization and technological change. That is why through our study we intend to fill in a gap
in the European and international literature. Moreover, our findings could give us the possibility
to formulate suggestions and proposals for the progression and evolution of Romanian
managerial accounting.
3. Managerial accounting practices and cost accounting tools and techniques in Romania
Research methodology
The main objective of this paper is to present how managerial accounting is perceived by
Romanian practitioners, to report the managerial accounting practices and cost calculation
techniques and systems adopted by Romanian organizations and to report if and how managerial
accounting information is used by managers. In order to find an answer to these questions we
conducted an empirical survey, via questionnaire, among Romanian accounting professionals
members of The Body of Expert and Licensed Accountants of Romania. The respondents were
asked to indicate: (1) the way managerial accounting is organized; (2) the objectives and
functions of managerial accounting; (3) the applied practices, techniques and cost systems; (4)
the utility of managerial and cost accounting information in the decision making process.
The questionnaire and a covering letter explaining the purpose of the study and presenting the
instructions needed to fill the questionnaire was sent to a sample of 1871 certified accounting
professionals. Finally, we received 178 responses, generating a response rate of 9.52%. Of the
178 responses 32 were eliminated, remaining 146 valid responses. The collected data was
processed using SPSS and was analyzed and explained with the help of descriptive statistics.
487
Research findings
After processing the data obtained we found out that the respondents came from various
industries. Services were represented by 53.4% of the respondents, followed by the
manufacturing industry with 26% and trading with 13.7%. Besides these industries other activity
sectors like public and local administration, banking or healthcare was represented by 6.8% of the
respondents.
Romanian organizations seems to recognize the importance, necessity and utility of managerial
accounting as they implement a managerial accounting system but they do not rely very much on
current regulation preferring to develop their own systems and techniques in accordance with
their specific activity. The results shows that 9.6% of the respondents developed a separate
managerial accounting system considering the actual regulations; 43.2% of the respondents are
using an integrated accounting information system; while 39% developed a specific managerial
accounting systems and adopted specific methods and techniques in accordance to their activity
and internal processes (Table nr. 1).
Table nr. 1 – The development of managerial accounting systems
Adoption and implementation of managerial accounting
systems
Frequency Percent Cumulative
percent
Valid
Development of a separate managerial
accounting system
Integrated accounting systems (for financial and
managerial accounting)
Development of specific managerial accounting
systems in accordance with activity
Non respondent
14
63
57
12
9.6
43.20
39.00
8.2
9.6
52.80
91.80
100.0
Total 146 100
Source: author’s projection
As for the objectives and functions of managerial accounting reducing and optimizing costs, cost
calculation of products and services, budgeting or providing cost type of information for the
decision making is considered to be a top priority of managerial accounting within Romanian
companies. On the other hand objectives like identifying and eliminating activities which doesn’t
add value or control and improvement of internal business processes are considered to be not so
important (Fig. nr. 1).
Fig. nr. 1 – Objectives and functions of managerial accounting in Romania
Source: author’s projection
488
An other objective of our study was to found out what are the managerial and cost accounting
tools and techniques used by Romanian practitioners. After analyzing the data collected we found
out that (Fig. nr. 2) traditional managerial accounting practices like global method, job-order or
process costing, standard costing are widely adopted and implemented by Romanian companies.
They do not place great emphasis on more recently developed tools and techniques like activity
based costing or target costing. The figure below shows that only 6.2% of the respondents
implemented successfully activity based costing method and 3.42% implemented target costing
while the majority has heard about these methods but never considered implementing them or
abandoned the implementation process.
Fig. nr. 2 – Managerial and cost accounting practices, tools and techniques
Source: author’s projection
Romanian practitioners seem to be pleased by traditional managerial and cost accounting
practices and techniques and with the results obtained. They consider that contemporary tools and
techniques require high implementation and maintenance costs; complex and complicated design
and work processes.
After presenting the main aspects regarding managerial accounting practices within Romania
companies the final objective of our study was to present to what extent managerial accounting
and cost type of information is used in the decision making process. Our results indicates that
managerial accounting is an advisor of management, the respondents considering that the
information provided are useful for business development; in operational, tactical or strategic
decision making. Moreover, based on cost type of information managers can take decisions
regarding the improvement and design of internal production and business processes; the
distribution and trade of products and services; performance measurement; investments or
finances (Fig. nr. 3).
Fig. nr. 3 – The utility of managerial and cost type of information in decision making
Source: author’s projection
489
4. Conclusions
With our study we tried to find out the way managerial accounting is organized within Romanian
companies; the objectives and functions of managerial accounting; the managerial and cost
accounting practices; and whether managerial and cost type of information is useful or not in the
decision making process.
Our results are in line with the conclusions drawn by Pavlatos and Paggios (2009), Albu (2006)
or Jinga et la (2010). Romanian companies seem to recognize the importance and utility of
managerial and cost accounting as they are implementing managerial accounting systems
integrated or separated by the financial accounting system. However, in this implementation
process they do not rely on current regulations, rather preferring to develop their own methods,
tools and techniques adapted to their specific activity. Despite these concerns we consider that
Romanian companies rely mostly on traditional practices and techniques neglecting
contemporary and recently developed tools.
Our results indicate that managerial accounting is closely related and tied up with cost
accounting. This strong connection between them derives from the use of contemporary
managerial and cost accounting practices and techniques which are not adapted enough to face
new production and market conditions or the needs of competition. Romanian companies are too
preoccupied with cost calculation and management, with budgeting or with the improvement of
internal production and business processes and in the same time they tend to neglect the
customer’s needs, market conditions and intensive competition.
We consider that in a world of globalization and intensive competition; in the era of automated
and advanced production processes and technologies more attention should be given to the
orientation towards market and customers, along with attention given to customer behavior,
buying behavior patterns and customer profitability. Under these conditions Romanian
companies will be forced to implement advanced managerial accounting practices, tools and
techniques in order to improve their cost control and cost management systems; to improve the
performance indicators; to realize an accurate analysis of customer profitability analysis and
performance measurement.
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