An Exploratory Study of the Level of Sophistication of Management Accounting Practices in Jordan

Abstract

Purpose -The research aims to provide a view of the present role of management accounting to identify the extent of usage of management accounting practices (MAPs) and finally to determine the sophistication level of MAPs by employing International Federation of Accountants model (IFAC) in the Jordanian financial sector. Design/methodology/approach -To attain these objectives, the research used the questionnaire method 64 valid questionnaires were returned, giving a 67.3% response rate. Descriptive statistical analysis was used to analyse the responses. Findings -Regarding the life-cycle stages, it was revealed that 67.2% of the respondent companies are located in the first two stages. The research reported that traditional practices are still widespread and highly used, rarely using the more sophisticated or advanced practices, and that there is a diversity of practices used in the financial sector context. In general, the research revealed that budgeting practices and financial measures are heavily used, and there is a lack of usage of decision making practices and strategic analysis practices. Concerning the sophistication level of MAPs, the research revealed that almost all of the Jordanian financial sector companies are located in the first stage by 64.1% and 29.7% of companies in the second stage based on the IFAC model, thus indicating the simplicity of information that they require. This, in turn, reflects the simplicity of practices that are used in the Jordanian financial sector. Originality/valueProvides a broad overview of management accounting practices in the Jordanian financial sector, indicates is a lack of using MAPs in the developing countries, and indicates the improvement which would take place in the Jordanian financial sector in terms of the adoption of more sophisticated or advance MAPs.

Traditional Vs. Contemporary Management Accounting Practices and its Role and Usage across Business Life Cycle Stages: Evidence from Pakistani Financial Sector

“…Therefore, there is a need of research on management accounting practices in developing countries (Sleihat, 2012). The usage of IFAC model (IFAC, 1998) to identifying the level of sophistication of management accounting practices in services sector has not been conducted frequently, so there is a gap in this sector (Sleihat, 2012). This model has already been used by the two researchers (Kader and Luther, 2006: Adelegan, 2000 in their studies in manufacturing firms.…”

“…It may be due to the shortage of knowledge of management accounting practices in this sector. Therefore, there is a need of research on management accounting practices in developing countries (Sleihat, 2012). The usage of IFAC model (IFAC, 1998) to identifying the level of sophistication of management accounting practices in services sector has not been conducted frequently, so there is a gap in this sector (Sleihat, 2012).…”

“…Through these practices decision making for management becomes easy and more accurate in an organization (Islam and Kantor, 2005). Sleihat, et al (2012) summarized costing practices in their sample of study. Their results indicate that the separation of fixed cost and variable costs are the mostly used.…”

“…The utilization of overhead rate in terms of plant was the second important variable and mean score 1.91 (Sleihat, et al 2012). According to Abdel-Kader and Luther, (2006) the costing practices especially separation of fixed and variable cost were used in large instead of activity based costing, marginal costing or absorption costs in British food and drinks industries.…”

“…The owners of corporations want to go not only up to the mark but also to achieve higher position in the market of their corporations in every aspect of the business (Sleihat et al, 2012). So the responsibilities of the directors going to increase in organizations, especially Management accounting tasks are very important to control cost, productivity and pricing decisions in an organization (Jhonsan and Kaplan, 1987).…”