Management Accounting Practices in China: Current Key Problems

ISSN 1392-3110
Socialiniai tyrimai / Social Research. 2012. Nr. 4 (29), 91–98
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Tallinn University of Technology, Ehitajate tee 5, 19086 Tallinn, Estonia
Shanghai University, No.20 Cheng Zhong Road, 201800 Shanghai, China
E-mail: [email protected], [email protected]
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A management accounting system has been
developing in China in the last three decades. In recent years
China is quickly stepping into a market-oriented economy
which requires many facets of its economy and society to
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currently undergoing a rapid change. This paper introduces
current management accounting practices in China. The
focus is laid on management accounting practices in small
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a few key factors and problems affecting the adoption and
application of a management accounting system in China.
For each of key problem suggested solutions are presented
and discussed. It is foreseen that the quality of management
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market process.
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In the last three decades China has undergone
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economy system. This restructuring process does
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state-owned enterprises (SOEs) and joint ventures
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privatization and market reform changes are also a
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Among other changes management accounting is one
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the developing trend and the underlying problems
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management accounting in China has played an
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important role in assisting economic planning and
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into current management accounting practices and
problems in China. The purpose of this study is to
identify key problems in the adoption and application
of management accounting practices in China and to
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management accounting system development but
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transitional economies as well.
The remainder of the paper is organized
in the following way. Part 1 is a literature review
summarizing different factors that affect management
accounting practices and changes in China. In part 2
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management accounting practices and changes.
Part 3 presents survey results and data analysis of
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accounting problems are suggested and discussed.
The last part is the conclusion that summarizes the
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research directions.
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In literature there are some research on factors
that affect management accounting practices in
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factors which emphasize a traditional management
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which include a macroeconomic situation and market
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In recent years a number of researchers
examined factors that affect Chinese management
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ownership structure (JV or SOE) is the most important
determinant for the level of adoption of management
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less important in comparison with the ownership
type. They also found that management accounting
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for SOEs compared with JVs. In a very recent article
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accounting practices and found that the size and level
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Chinese government was found to have very little
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government on management accounting practices
may not be as big as in previous years due to further
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economy. As a result there is an urgent need to
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accounting practices and what are possible solutions
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The emergence of western management
accounting concepts and practices in China can be
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Since then management accounting practices have
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accounting were important methods for measuring
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notable developments that occurred in management
accounting practices were build-up cost accounting
systems for different industries and implementation
of cost management techniques. Yang indicated
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SOEs and documented in the Chinese accounting
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accounting and budgeting were applied in SOEs in
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played an important role in the centrally planned
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management accounting concepts and practices
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advances of western management accounting
concepts and practices in China happened in the last
decade because during the last decade China entered
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oriented economy system. These macroeconomic
processes and changes will require corresponding
changes from management accounting practices
particularly in SOEs and JVs.
During the past three decades China has been
developing its management accounting system in
most SOEs and JVs. In recent years the focus of
management accounting has shifted from traditional
cost accounting and budgeting to value-based
management and strategic management accounting.
Despite of the development of a steady management
accounting system there are a number of problems
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discussed below.
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It is generally agreed that there is no
comprehensive and consistent management accounting
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accounting embraces knowledge and theories
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branches of management accounting pose challenges
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management accounting theory or technique should
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in management accounting for decision making and
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framework for quantitative analysis. A discrete and
qualitative nature of management accounting leads to
underestimate its role in management and decision
making in China. The Chinese accounting community
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instead of management accounting in budgeting and
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environment is different from many other countries.
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used in western accounting practices but in China a
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management accounting theories and models need to
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Chinese business environment.
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Even in recent years management accounting
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used in SOEs and JVs in coastal open cities of China.
In western and inner parts of China and private
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using management accounting systems. Accounting
professionals also lack education in management
accounting and many do not have necessary
knowledge and skills to do management accounting
practices. There is also a lack of necessary software
to support management accounting calculations and
decision making.
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Some good cases have happened in the Chinese
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successful cases for the application of a management
accounting system did not receive much attention
among the accounting community and no systematic
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very little knowledge about Chinese management
accounting practices has been obtained from these
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there is also a lack of good management accounting
case studies and consequent knowledge generation
from these cases.
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study is one of the most popular majors in Chinese
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management education as well as the number of
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is of strategic importance to have more management
accounting education and professionals in China in
order to lead strategic planning and management at a
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In this research a questionnaire survey was
used to collect data concerning use of a management
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questionnaire survey was conducted in summer 2012
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were chosen according to different locations in the
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located in Tongzhou district of Nantong city.
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accountants who possess professional accounting
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was conducted via either e-mail communication or
in face-to-face interviews. Face-to-face interviews
were found to be more responsive than e-mail
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food processing and new energy industries.
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a relative weaker usage of a management accounting
system and practices. This was evidenced by the
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Table 1
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Internal financial analysis
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Capital investment
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Responsibility accounting
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Activity-based costing
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the fundamental role of management accounting.
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table we know that the application of management
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analysis and capital investment decision analysis and
applications in other areas are rather limited.
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methods used.
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factors that hinder the application and development
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received the following answers as shown in Table 2.
Table 2
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Factors
Number of answers
Percentage
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Other factors
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In Table 2 a number of factors that hinder
the application and development of a management
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in a management accounting system and practices
then there will be no applications of management
accounting at all. Therefore management interest
and knowledge is the key driver for the application
of a management accounting system. The result
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accounting system may not be suitable for the
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a lack of the adoption of a management accounting
system is due to incapability of professional
accountants. The results clearly show the most
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development of a management accounting system
and practices in China.
analysed and concluded for knowledge generation
and sharing. These cases can be used as a template
for management accounting practices in China
and they can also be used for teaching and training
management accounting students and professionals.
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Traditionally management accounting in
China focuses on cost accounting and budgeting
in the manufacturing sector. In the future the focus
should be shifted to strategic management accounting
theory and practice development. There should be a
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accounting in terms of contents. The contents of
management accounting thus must be adjusted
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should include more practice-oriented contents
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experiences from strategic management and control.
The aim of management accounting should be to
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its long-term objectives. Financial measurements
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to give a comprehensive and reliable evaluation. A
future management accounting system should also
emphasize the role of users in the planning and
management process. It is desired to be a user-centred
system.
China is undergoing a rapid change with regard
to its economy system and it is on the way to develop
an open and market-oriented economy system.
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major problems in Chinese management accounting
practices through literature study and questionnaire
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to the existing key problems.
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Although western countries have a welldeveloped management accounting system and a
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economies are still in the middle of the way to
develop their management accounting systems.
There is still a big room for China to develop its
management accounting system and practices. In
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that the western management accounting system
fails to meet the internal and external needs of the
Chinese business environment. It is important not
to copy the western system directly because China
has its unique economic and business environment.
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to treat the compound interest is quite different in
China. In developing a unique Chinese management
accounting system the focus should be laid on the
establishment of a comprehensive management
accounting framework in order to evaluate what real
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making strategic decisions and management.
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It is important to combine both theory
and practice in management accounting. For this
purpose an association of management accounting
professionals can be established in China. The
members can be from both academia and industry
to enrich interaction and discussion between people
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level of management accounting knowledge of
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also validated in the questionnaire survey conducted
in this study. Therefore there is a great need to train
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percentage of management accounting courses must
be increased in university education especially in
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courses currently are dominating. In order to maximize
the number of management accounting professionals
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be established. The overall aim is to increase the
level of management accounting knowledge among
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Probably one of the obstacles for management
accounting development in China is a lack of proper
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there are numerous softwares developed for different
tasks and purposes. Therefore it is of vital importance
to design and develop powerful softwares for strategic
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and decision making. These softwares should focus
on value creation and decision making at a system
level.
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This paper discusses current management
accounting practices in China and factors that affect
these practices and changes. A questionnaire survey
was conducted in this study to identify current
management accounting practices and problems for
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development of a management accounting system are
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management accounting is the key enabler to further
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key problems include a lack of proper management
accounting tools and softwares and management
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key problems in current management accounting
practices in China solutions to these key problems
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continuous development towards privatization and a
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change. It is concluded that China should develop its
own management accounting system based on a welldeveloped western management accounting system
to incorporate unique regulations and features of the
Chinese business environment. For this purpose China
should modify the existing management accounting
courses and contents for both theory teaching and
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training should be extended to all relevant players
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order for a management accounting system to work
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software to enable value-based strategic management
and decision making.
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gement accounting system in China is a huge and
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and modernization of its legal system China will
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accounting system in the near future. The quality
of management accounting practices will thus be
improved in the future.
For future research directions it would be
necessary to do an exploratory case study or a number
of case studies on current management accounting
practices and changes in China. In addition to
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from the service sector can also be used. The purpose
of an exploratory case study is to identify uncertainties
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organizations operating in China and to generate the
best knowledge and solutions to uncertainties. The
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IRU VHQLRU PDQDJHUV DFFRXQWLQJ SURIHVVLRQDOV DQG
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also have implications for other transitional economics
in developing their management accounting system
and practices.
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market. Journal of Economic Perspectives
)LUWK07KHGLIIXVLRQRIPDQDJHULDODFFRXQWLQJSURFHGXUHVLQWKH3HRSOH¶V5HSXEOLFRI&KLQDDQG
WKHLQÀXHQFHRIIRUHLJQSDUWQHUHGMRLQWYHQWXUHVAccounting, Organizations and Society 4LDR< - :K\ DUH VWDWHRZQHG HQWHUSULVHV
weak in the application of management accounting
SUDFWLFHV" Accounting Research LQ &KLQHVH %URPZLFK 0 :DQJ * 0DQDJHPHQW DFcounting in China: A current evaluation. The International Journal of Accounting
6NRXVHQ & 5 <DQJ - :HVWHUQ PDQDJHment accounting and the economic reforms of China.
Accounting, Organizations and Society
6FDSHQV 5 : <DQ 0 0DQDJHPHQW DFcounting research in China. Management Accounting
Research
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DGRSWLRQ RI ³:HVWHUQ PDQDJHPHQW DFFRXQWLQJFRQWUROV LQ &KLQD¶V VWDWHRZQHG HQWHUSULVHV GXULQJ HFRnomic transition. Accounting, Organizations and Society
/LX.&=KDQJ:*Contemporary Accounting Issues in China: An Analytical Approach.
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within Sino-foreign joint ventures. Journal of World
Business
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of management accounting practices. Journal of Management Accounting Research
&KLOG-Management in China during the age
of reform&DPEULGJH(QJODQG8QLYHUVLW\3UHVV
-DUYLQHQ-,QVWLWXWLRQDOSUHVVXUHVIRUDGRSWing new cost accounting systems in Finnish hospitals:
two longitudinal case studies. Financial Accountability & Management
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accounting: current situation and solution. Accounting
ResearchLQ&KLQHVH
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Journal of International Business Studies &KLOG-0DUNRF]\/+RVWFRXQWU\PDQDJHrial behavior and learning in Chinese and Hungarian
joint ventures. Journal of Management Studies
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nese joint ventures: A comparative case study. Academy of Management Journal
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quality management accounting practices in China.
Managerial Auditing Journal
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emphasis of western management accounting practices in Chinese SOEs and JVs. The International Journal of Accounting
:X-%RDWHQJ$)DFWRUVLQÀXHQFLQJFKDQJes in Chinese management accounting practices. Journal of Change Management
23. Available online at: http://www.shufe.edu.cn/structure/english/index.
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Résumé
Cet article présente les pratiques en matière de
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en matière de comptabilité de gestion dans les petites et
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VRQWLGHQWL¿pVSDUO¶pWXGHGHODOLWWpUDWXUHHWSDUODFRQGXLWH
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système de comptabilité de gestion sont tout à fait limités
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de la gestion et la connaissance des entreprises sur la
comptabilité de gestion sont un catalyseur clé de continuer
à renforcer le système de comptabilité de gestion chinois.
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bonnes outils de comptabilité de gestion et de logiciels et
de professionnels appropriés de la comptabilité de gestion.
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pratiques courants en matière de comptabilité de gestion en
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discutées. Celles-ci incluent:
1. Formation du système de comptabilité de gestion
chinois-- Il est important pour la Chine de ne pas copier
le système de gestion de la comptabilité occidentale
directement parce que la Chine dispose de son propre
environnement économique et commercial uniquement.
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SRXU UpSRQGUH DX[ EHVRLQV GHV XWLOLVDWHXUV FKLQRLV SDU
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des décisions et de gestion stratégiques.
2. La combinaison de la théorie et de la pratique -Il est important de combiner la théorie et la pratique dans
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entre les personnes bonnes dans la théorie et la pratique. En
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cas typiques de comptabilité de gestion pour la génération
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employés comme calibre pour des pratiques en matière de
comptabilité de gestion en Chine et ils peuvent également
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professionnels de comptabilité de gestion.
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de gestion - traditionnellement la comptabilité de gestion
en Chine se concentre sur la comptabilité des coûts et la
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gestion stratégique et au développement de pratique. Il
devrait y avoir une distinction claire entre la comptabilité
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en conséquence. Par exemple la comptabilité de gestion
devrait inclure plus de contenu pratique-orienté tel que
des études de cas et la connaissance et des expériences de
première main de gestion et de commande stratégiques. Le
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de gestion de la comptabilité devrait également souligner
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centré.
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a un grand besoin de former les cadres supérieurs de
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maximiser le nombre de professionnels de comptabilité
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de la connaissance de comptabilité de gestion parmi des
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et des fonctionnaires de gouvernement.
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de gestion - probablement un des obstacles pour le
développement de comptabilité de gestion en Chine est le
manque de logiciel approprié pour faire le travail. Pourtant
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softwares développés pour différent charge et des buts. Par
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HW GpYHORSSHU OHV VRIWZDUHV SXLVVDQWV SRXU OH FDOFXO
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stratégiques de comptabilité de gestion. Ces softwares
devraient se concentrer sur la création de valeur et la prise
de de décision au niveau de système.
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la comptabilité de gestion en Chine est un énorme et
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LODEHDXFRXSGHFKHPLQjIDLUH&HSHQGDQWHQFRQIRUPLWp
DYHF OH GpYHORSSHPHQW GH O¶pFRQRPLH RULHQWp YHUV OH
marché de la Chine et sa modernisation de son système
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proche. La qualité des pratiques en matière de comptabilité
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The article has been reviewed.
Received in September 2012; accepted in November 2012.