Abstract
Managerial accounting is an important component of organizational activity that defines the quality of financial information and serves as a basis for forming the strategic goals of the company. The rapidly changing business environment and the emergence of new concepts in the recent decades created the need for the update of the traditional managerial accounting frameworks. As a result, several tools were developed and gradually adopted by major players in the field that responded to the changing demands of the market.
However, the adoption was uneven, with some countries retaining the traditional frameworks and tools. The purpose of the research paper is to assess the prevalence of managerial accounting tools and methods used in the GCC countries in order to determine the preferred approach to accounting in organizations.
Main Body
The Gulf Cooperation Council (GCC) is an economic union formed of six states from the Arabian Gulf. In the recent decade, the GCC has displayed an impressive economic capacity and demonstrated a growth rate which allowed its members to emerge as key players on the global scene, mostly due to the abundance of valuable natural resources. In such setting, the importance of managerial accounting for facilitating the performance of the economies becomes obvious. It is, therefore, tempting to conclude that the described shift in the managerial accounting frameworks and tools is equally applicable to the situation.
However, the cultural and social specificities of the region pose a potential barrier to the update of the practices. Specifically, the ownership of the majority of businesses in the Arabian Gulf still remains predominantly owned by government or family-owned. In contrast, the majority of the countries which adopted the updated managerial accounting frameworks (e.g. the Western European countries) employ a number of diverse stakeholders. Therefore, it is reasonable to expect a much lower variety of frameworks and managerial accounting methods in the GCC countries compared to the rest of developed economies.
The purpose of the research paper is to assess the prevalence of managerial accounting tools and methods used in the GCC countries in order to determine the preferred approach to accounting in organizations. The focus of the research is on distinguishing between the traditional approaches, such as those based on the divisional profits versus the current-generation methods such as those involving costing-based activity.
The research will be based on the survey distributed among the managerial accountants employed by various firms across the GCC countries. The questions will be focused on the use of specific tools, methods, and analytical approaches utilized by the accounting departments of the organizations. The obtained results will then be analyzed to obtain a comprehensive picture of the involved methods which would allow extrapolating the integration of the modern frameworks. The existing literature will be surveyed for the presence of similar research in a similar setting in order to substantiate the findings, locate the possible differences, and possibly identify the causes of discrepancies.
The available body of research on managerial accounting contains several similar studies pertinent to different countries. However, the research often focuses on a specific area of managerial accounting.For instance, an exploratory study by Zheng and Alver (2015) identifies the growing need for the implementation of governmental management accounting in China. At the same time, the study points to the lack of recognition of the framework within the internal economic environment, insufficient knowledge of the matter, the disparity between managerial and financial subset of accounting, and significant complexity caused by the presence of complex governmental regulations, laws, and policies (Zheng & Alver, 2015).
A study by Zheng (2012) explored the key factors undermining the efficiency of managerial accounting within Chinese small and medium enterprises. The results of the survey identified the lack of relevance of the managerial practices with the needs of the economic environment and the lack of recognition of the role of managerial accounting in organizational performance as two leading factors identified by the respondents (Zheng, 2012).
Both sources have a certain degree of relevance for the GCC setting due to the relatively similar dynamics of the economic development. A literature review by Sulaiman, Nazli Nik Ahmad, and Alwi (2004) reached similar conclusions on a range of Asian countries, including Malaysia, India, and Singapore. All of the reviewed countries showed little to no implementation of the innovative techniques and accounting frameworks, lack of recognition of managerial accounting’s importance, and strong reliance on traditional methods (Sulaiman et al., 2004). Considering certain social similarities, it is reasonable to believe that the results are at least partially applicable to GCC countries.
Research by Abdel-Kader and Luther (2006) studied the use of managerial accounting practices (MAP) in the British food and drinks industry. The findings indicated the discrepancy between the perceived importance and voiced understanding of the innovative MAPs such as balanced scorecard and their implementation in real-world scenarios (Abdel-Kader & Luther, 2006). Interestingly, the actual percentage of traditional practices employed by the companies is comparable to that in Asian countries, which further complicates the matters. The phenomenon was further investigated by Abdel-Kader and Luther (2008) and identified as dependent upon several factors, with customer power being the most underrated factor (Abdel-Kader & Luther, 2008).
Based on the located sources, the alternative MA frameworks are under-researched in the GCC countries, which is unacceptable given the growing importance of MAPs in the region as well as its value for organizational performance (Ghanbari & Vaseli, 2015). Therefore, the proposed research is expected to enhance our understanding of the issue and identify directions for improvement in the area.
References
Abdel-Kader, M., & Luther, R. (2006). Management accounting practices in the British food and drinks industry. British Food Journal, 108(5), 336-357.
Abdel-Kader, M., & Luther, R. (2008). The impact of firm characteristics on management accounting practices: A UK-based empirical analysis. The British Accounting Review, 40(1), 2-27.
Ghanbari, M, & Vaseli, S. (2015). The role of management accounting in the organization. International Research Journal of Applied and Basic Sciences, 9(11), 1912-1915.
Sulaiman, M. B., Nazli Nik Ahmad, N., & Alwi, N. (2004). Management accounting practices in selected Asian countries: A review of the literature. Managerial Auditing Journal, 19(4), 493-508.
Zheng, X. (2012). Management accounting practices in China: Current key problems and solutions. Social Research, 29(4), 91-98.
Zheng, X., & Alver, J. (2015). An exploratory study of governmental management accounting in China. Journal of Applied Management and Investments, 4(2), 102-110.