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Cost Accounting in Anglophone Subsidiaries

Empirical Evidence from Germany


Moritz Schröder

Cost accounting in Anglophone countries is in general less detailed than German cost accounting. Such cross-national differences imply a tension for Anglophone multinationals operating in Germany. These firms have to balance the group-wide application of their home-country traditions and the approval of diverging local cost accounting systems. By the means of a dyadic research design, this study finds empirical evidence for Anglophone cost accounting traditions to prevail in subsidiaries of Anglophone multinationals in Germany. However, the top management teams in these subsidiaries tend to work around such coercive pressures. The findings also suggest that the subsidiaries prefer to deviate from their parent companies’ traditions to ensure the usefulness of information for their cost accounting systems.
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Since the industrialisation in the 19th century, cost accounting has developed into one of the key management accounting tools in practice. As a consequence, it has also become an important topic in education and a relevant research object for management accounting scholars. However, cost accounting has not delevoped uniformly across countries, but has rather been shaped by various institutional forces such as national culture, education and financial accounting systems. As a result, specific national cost accounting traditions have emerged and still prevail today despite a trend to global standardisation of management accounting practices. Broadly speaking there are two main traditions: German and Anglophone cost accounting. Companies from Germany are known for their very detailed and refined cost accounting systems, whereas firms from Anglophone countries such as the USA or UK generally have less complex systems in place. Such national particularities naturally evoke the question how multinational firms design their cost accounting systems. Whereas from a corporate perspective, standardised cost accounting systems seem to be very appealing, subsidiary companies may favour their local cost accounting traditions over a corporately induced standard.

Even though there is fragmented research on the design of cost accounting systems in international groups, little is known about the actual consequences of cross-national differences of cost accounting for multinationals. Do these companies indeed transfer their home country’s cost accounting traditions in their foreign subsidiaries and if so, what are the consequences for the use of cost information in subsidiaries? Continuing my interest in management...

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