Achmad Faizal Azmi (361160)

The Development and Future of Management Accounting in Japan and the USA
Management accounting in Japan went through two main stages of development after
the Second World War, the first period was westernization while the second period was
japanization. the period from the 1950s to the 1970s was a time of government leadership in
Japanese management accounting. 1970s was a time of government leadership in Japanese
management accounting. It witnessed the establishment of modern management organization
and accounting control involving the formation of modern stock companies after the
dissolution of the pre-war financial cliques (Zaibatu). At the same time, they adopted profit
planning and budgetary control from the 1950s to the 1960s, because foreign governments,
investors and banks required them to bring forward their plans for fund usage. In response to
these demands, Japanese government leadership established modern management accounting
in Japan by introducing advanced accounting systems from the USA after the Second World
War.
In contrast to Japan, American management accounting from the 1950s had been
geared towards planning or strategy. In the USA, information theory played a more important
role in all fields of accounting than it did in Japan, because information was thought to be
indispensable to decision-making in management. Managers expected to make the best
decision by using this information in models. Recent rapid progress in high technology (the
automation of production processes and the computerization of office services) and
increasingly competitive international markets led to changes in management accounting
systems in the USA and Japan. Japanese companies have striven to research and develop the
strategic product more strongly than American companies, because they have aimed at
international competitive power since the end of the Second World War. By the 1970s,
through learning from the West, Japanese enterprises had established modern management
accounting: budgetary control and standard costing. Japanese automobile companies have
adopted the Kanban (just-in-time) production system or cost design. However, Japanese
accountants do not understand completely how to characterize cost design from the
accounting viewpoint, even less how to describe the relationship between the JIT system and
cost accounting and the differences between cost design, and standard costing and budget.
Transplanting Japanese Management Accounting and Cultural Relevance
The Japanese business community strongly believes that the successful penetration of
Japanese companies into international markets had been as a result of its management system
(including its system of management accounting). After a decade of implementation, some
analysts have praised the success of Japanization, while others have criticized it for its
detrimental impacts, especially the cultural conflicts that have been caused.
The relationship between accounting and culture has received much consideration in
recent accounting literature, particularly that in the field of financial accounting. When the
broadness of culture is linked directly with the narrow concept of budget control practice, the
latter is often unable to reflect the full complexities of culture.
Target costing is typical of Japanese management accounting and closely related to
just-in-time (JIT) production techniques. Target costing plays an important role in JIT. The
interaction between cost accountants and engineers, the relationship between feedback and
feedforward. The combination of JIT and target costing results in a Japanese management
system based on the concept of zero inventory and zero defects and ultimately an integration
of low cost and high quality. When the impact of culture on management accounting is
examined on the basis of Hofstedes value dimensions, it is indisputable that a strong national
culture characterizes Japanese management accounting. Judging from transfer costs, the
process of Japanization is very costly. If there are not enough conditions for benefit from
transfer cost, Japanese companies will not achieve profit by transplanting their system of
management. Furthermore, transplanting must be evaluated with regard to the costs and
benefits to be earned in the countries to which Japanese management is transferred.
Asian Economic Growth and Management Accounting
In the middle of the 1980s, Japanese management accounting was considered to have
contributed to the high growth rates of the Japanese economy. As a result, corporations in
foreign countries began to introduce the Japanese model of management accounting in order
to bring about the integration of low cost and high quality. Japanese corporations believed
that the Asian economy would continue to grow with the support of their management
accounting systems, when they were transferred to other Asian countries. However, some
may conclude that any consideration of the overseas transfer of the Japanese management
accounting method is no longer meaningful.
In ASEAN countries, the amount disbursed for the research and development of
advanced management accounting systems does not match the benefits to the domestic
enterprises, particularly the small and mediumsized ones. Therefore, a parallel system of
advanced and backward management accounting has taken shape between multinational
enterprise and domestic firms in some ASEAN countries. It follows from examining the
development of management accounting in several Asian countries, that the NIEs have
followed Japanese advanced management accounting, as have some ASEAN countries. China
and Vietnam are continuing to pursue NIEs management accounting. This situation may be
termed the wild geese flight accounting model. management accounting to Asian nations
would enhance this model, causing the Asian economy to grow continually.
Japanese Management Accounting and its Effects on the Asian-Pacific Region
Most Japanese students stand at a turning point in the research on management
accounting. However, Japanese scholars as students of the American scholars did not reach
the stage of perfect confidence in management accounting research. Field study in Japan has
never clarified whether the successful management of large Japanese firms depended on
proper accounting information system, or on the proper use of accounting information.
As a result of joint undertakings with foreign enterprises, Japanese overseas affiliates
achieved good results in Asian countries in contrast to their difficult position in Europe and
North America. In general, Japanese overseas affiliates in Asian countries were poorly
equipped and labour-intensive and had low levels of productivity in comparison with their
North American counterparts which were capitalintensive, well-equipped and exhibited high
labour productivity. the competitive power of companies in Asia could not be strengthened in
the international markets where they relied only on low cost. No affiliate would succeed in
enlarging its market share without integrating low cost and high quality.
By means of the integration of high quality and low cost, Japanese companies have
succeeded in selling their products widely in international markets. This integration was
supported in Japan by horizontal organization and two-way management. This style of
management, combining with the just-in-time production system, enabled companies to
organically integrate high quality with low cost. At the same time, target cost should always
be realized through the cooperation of all functional departments. Target costing consisted of
two processes: genka kikaku (cost design) and genka kaizen (continuous cost improvement).
The horizontal and two-way management required a two-way information system. This
system was embodied in Japanese target costing.
More recently, companies in Asia have been reorganizing their management systems
to adapt them to the new economic conditions of shortage labour and higher wages, and keen
competition in international markets. It may be difficult for them to increase product quality
at the expense of cheap labour. Therefore, they are zealous in importing the whole system of
JIT and target costing.