IDEAS home Printed from https://ideas.repec.org/a/bla/abacus/v45y2009i2p249-274.html
   My bibliography  Save this article

Investment‐Based Cost Accounting as a Fundamental Basis of Decision‐Oriented Management Accounting

Author

Listed:
  • HANS‐ULRICH KÜPPER

Abstract

Decision making concerns over cost allocations, especially common cost allocations, have a long history. They are well canvassed in Thomas (1969) and Wells (1978). This article revisits the cost allocation debate, albeit in a new setting, and rehearses arguments relevant to long‐ and short‐term decision contexts. Here a means is proposed to address those problems, namely to adopt the investment‐based approach to cost accounting. This approach draws on ideas of Hotelling (1925), Preinreich (1938) and Schneider (1961), and applies the notion of net present value in another setting, namely to cost accounting theory. Research has revealed no discussion of this in the Anglo‐American literature. This article shows analytically that the investment‐based approach offers a general basis for decision‐oriented cost accounting, as it combines investment theory with cost accounting and thereby connects long‐term with short‐term decisions. While reviewing primarily European literature, it also examines several Anglo‐American works. The analysis reveals how for three classical decision problems—production program planning, purchase order lot sizes, and break‐even price limits—two different types of costs, namely depreciation and material costs, have to be based on cash flows and net present value. The proposed investment‐based approach permits an examination of the extent to which cost accounting concepts and cost information are relevant to those decisions. This theoretical concept is used to derive pertinent cost dimensions and to solve traditional problems of cost allocation. A caution is that the investment approach is limited to decision facilitating cost accounting. Whether it may be possible to couple it with agency theory and its focus on decision influencing has not been explored and is an issue for further research.

Suggested Citation

  • Hans‐Ulrich Küpper, 2009. "Investment‐Based Cost Accounting as a Fundamental Basis of Decision‐Oriented Management Accounting," Abacus, Accounting Foundation, University of Sydney, vol. 45(2), pages 249-274, June.
  • Handle: RePEc:bla:abacus:v:45:y:2009:i:2:p:249-274
    DOI: 10.1111/j.1467-6281.2009.00284.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1467-6281.2009.00284.x
    Download Restriction: no

    File URL: https://libkey.io/10.1111/j.1467-6281.2009.00284.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Feltham, GA & Ohlson, JA, 1996. "Uncertainty resolution and the theory of depreciation measurement," Journal of Accounting Research, Wiley Blackwell, vol. 34(2), pages 209-234.
    2. Grossman, Sanford J & Stiglitz, Joseph E, 1977. "On Value Maximization and Alternative Objectives of the Firm," Journal of Finance, American Finance Association, vol. 32(2), pages 389-402, May.
    3. Alfred Wagenhofer, 1994. "Transfer pricing under asymmetric information," European Accounting Review, Taylor & Francis Journals, vol. 3(1), pages 71-103.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Liu, Siqi & Yin, Chao & Zeng, Yeqin, 2021. "Abnormal investment and firm performance," International Review of Financial Analysis, Elsevier, vol. 78(C).
    2. Peter Pope & Pengguo Wang, 2003. "Discussion of Positive (Zero) NPV Projects and the Behavior of Residual Earnings," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(1‐2), pages 17-24, January.
    3. Thomas Kaspereit & Kerstin Lopatta, 2013. "The Value Relevance of SAM's Corporate Sustainability Ranking and GRI Sustainability Reporting in the European Stock Markets," ZenTra Working Papers in Transnational Studies 19 / 2013, ZenTra - Center for Transnational Studies, revised Oct 2013.
    4. Kenton K. Yee, 2006. "Earnings Quality and the Equity Risk Premium: A Benchmark Model," Contemporary Accounting Research, John Wiley & Sons, vol. 23(3), pages 833-877, September.
    5. Joy Begley & Sandra L. Chamberlain & Yinghua Li, 2006. "Modeling Goodwill for Banks: A Residual Income Approach with Empirical Tests," Contemporary Accounting Research, John Wiley & Sons, vol. 23(1), pages 31-68, March.
    6. Atoche, Teresa duarte & Pérez lópez, José ángel & Camúñez ruiz, Jose antonio, 2012. "La relevancia de los gastos de I+D. Estudio empírico en el sector del automóvil," Revista de Contabilidad - Spanish Accounting Review, Elsevier, vol. 15(2), pages 257-286.
    7. Palea, Vera, 2014. "Are IFRS value-relevant for separate financial statements? Evidence from the Italian stock market," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 23(1), pages 1-17.
    8. Imtiaz Ahmad & Pascal Alphonse & Michel Levasseur, 2010. "Les Effets De La Croissance Et De L'Endettement Sur Les Multiples De Capitaux Propres : Representation Theorique Et Comparaison Internationale," Post-Print hal-00481584, HAL.
    9. Robert A. Taggart, Jr., 1980. "Taxes and Corporate Capital Structure in an Incomplete Market," NBER Working Papers 0594, National Bureau of Economic Research, Inc.
    10. Karampinis, Nikolaos I. & Hevas, Dimosthenis L., 2011. "Mandating IFRS in an Unfavorable Environment: The Greek Experience," The International Journal of Accounting, Elsevier, vol. 46(3), pages 304-332, September.
    11. Callen, Jeffrey L., 2015. "A selective critical review of financial accounting research," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 26(C), pages 157-167.
    12. Fanti, Luciano & Gori, Luca & Sodini, Mauro, 2012. "Nonlinear dynamics in a Cournot duopoly with relative profit delegation," Chaos, Solitons & Fractals, Elsevier, vol. 45(12), pages 1469-1478.
    13. Ulf Schiller, 1999. "Information management and transfer pricing," European Accounting Review, Taylor & Francis Journals, vol. 8(4), pages 655-673.
    14. Ben-Shahar Danny & Sulganik Eyal, 2009. "Fair Depreciation: A Shapley Value Approach," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-18, April.
    15. Joseph E. Stiglitz, 2017. "The Revolution of Information Economics: The Past and the Future," NBER Working Papers 23780, National Bureau of Economic Research, Inc.
    16. Jan A. Kempkes & Francesco Suprano & Andreas Wömpener, 2023. "An empirical evaluation of dynamic approaches for estimating firms’ expected cost of equity capital," The Financial Review, Eastern Finance Association, vol. 58(4), pages 859-886, November.
    17. Arturo Leccadito & Stefania Veltri, 2015. "A regime switching Ohlson model," Quality & Quantity: International Journal of Methodology, Springer, vol. 49(5), pages 2015-2035, September.
    18. Savita A. Sahay, 2014. "Transfer Pricing in a Multi-Product Environment," Accounting and Finance Research, Sciedu Press, vol. 3(4), pages 132-132, August.
    19. Elges, Carsten, 2016. "Die Preissetzung in Unternehmenskooperationen: Erste spieltheoretische Überlegungen," Arbeitspapiere 162, University of Münster, Institute for Cooperatives.
    20. Dmitry Livdan & Alexander Nezlobin, 2017. "Accounting rules, equity valuation, and growth options," Review of Accounting Studies, Springer, vol. 22(3), pages 1122-1155, September.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:abacus:v:45:y:2009:i:2:p:249-274. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0001-3072 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.