Adaptation of Life Cycle Costing Practices to Financial Performance Analysis in Transitional Economies: The Experience of Russian Manufacturing Firms

In today’s business environments driven increasingly by knowledge, the efficient use of resources largely depends on how well entrepreneurs apply innovations in managing them. Among the knowledge-based sources for increasing performance are accounting-related practices of cost management. However, there is a lack of models for constructing accounting records based on the stages of the product’s life cycle cost (LCC), methods for calculating the total cost of the LCC in relation to specific industries, and methods for identifying the stages of the LCC. Although many studies have focused on adapting to the LCC system strategically and studying its effectiveness and cost structure at different stages of the life cycle, few have considered the methodological aspects of establishing a costing system. This paper presents a comparative analysis of the most commonly used accounting and calculation methods used in manufacturing companies in Russia. The study is based on questionnaires collected in a survey of seven companies specializing in the manufacture of boilers for centralized and autonomous heating systems. In addition to interviewing experts, accounting documents were also analyzed. For the manufacturing sector, the authors proposed an accounting model based on the stages of a product’s life cycle. They also developed methods for calculating and identifying costs by stage of the product’s life cycle. These approaches could be useful for accounting and analytical staff when setting up knowledge-based accounting systems for analyzing business information, particularly for creating recordkeeping systems for LCC calculations. Additionally, these approaches could enhance the knowledge support systems for making managerial decisions.