On the Convergence of Financial Accounting and Management Accounting

58 Pages Posted: 25 Apr 2009

See all articles by Jani Taipaleenmaki

Jani Taipaleenmaki

University of Turku - Department of Accounting and Finance

Seppo Ikaheimo

Aalto University

Date Written: April 24, 2009

Abstract

Both financial accounting (FA) and management accounting (MA) have recently developed towards increased forward-looking perspective. FA has transformed from historical cost accounting for stewardship purposes to fair value accounting for valuation purposes and decision making, and MA from short-term planning and control to strategic planning and control.

Based on the analytical model by Hemmer & Labro (2008), these trends are not separate from each other. They argue that the forward-looking perspective of FA leads to forward-looking MA and is the origin of need for the convergence of FA and MA. Drawing on Hemmer & Labro we build a theoretical framework for analyzing this convergence. On the basis of our analysis, we argue that recent development of information technology towards increasing integration is the main enabler of this convergence process. We argue further that the convergence is a much broader phenomenon than claimed by Hemmer and Labro.

We present observations both in the technical and technological (including accounting standards, discretionary reporting, performance measurement, transfer pricing, due diligence in M&As, and competitor analysis) and the behavioral and organizational manifestation domains (including accounting processes, work and role of accountants, accounting in multinational companies, incentive systems, control of business networks and board of directors and venture capitalists) on this convergence. We found that the increasingly strong forward-looking FA elements rest heavily on MA and vice versa. Based on these convergence observations we suggest several avenues for further research, which increase the relevance of accounting research with multiple theoretical approaches.

Keywords: accounting, convergence

JEL Classification: M41, M43, M45, M46

Suggested Citation

Taipaleenmaki, Jani and Ikaheimo, Seppo, On the Convergence of Financial Accounting and Management Accounting (April 24, 2009). Available at SSRN: https://ssrn.com/abstract=1394373 or http://dx.doi.org/10.2139/ssrn.1394373

Jani Taipaleenmaki (Contact Author)

University of Turku - Department of Accounting and Finance ( email )

Rehtorinpellonkatu 3
FI-20500 Turku
Finland

Seppo Ikaheimo

Aalto University ( email )

P.O. Box 21210
Helsinki, 00101
Finland

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