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A Theoretical Analysis of the Impact of Adopting Rolling Budgets, Activity-Based Budgeting and Beyond Budgeting


  • Stephen Hansen


Budgeting accomplishes many goals in an organization and evaluating the potential impact of a change is difficult. I investigate the organization-wide effects of three distinct budgeting alternatives (rolling budgets, activity-based budgeting and beyond budgeting) using a model that incorporates three important budgeting functions: forecasting, operational planning and performance evaluation. From the perspective of the whole organization, each budgeting alternative improves profits. I then examine the department preferences for each alternative when each function is under the control of a different department and each department has its own, department-specific performance metric. Forecasting is judged on the variance of the base demand forecast, operational planning on the expected unit capacity costs and performance evaluation on the salesperson's expected action. In my model all departments always favor rolling forecasts, while only one department always favors beyond budgeting (or activity-based budgeting). For beyond budgeting and activity-based budgeting, the preferences of the two other departments vary depending upon the model parameters.

Suggested Citation

  • Stephen Hansen, 2011. "A Theoretical Analysis of the Impact of Adopting Rolling Budgets, Activity-Based Budgeting and Beyond Budgeting," European Accounting Review, Taylor & Francis Journals, vol. 20(2), pages 289-319.
  • Handle: RePEc:taf:euract:v:20:y:2011:i:2:p:289-319
    DOI: 10.1080/09638180.2010.496260

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    Cited by:

    1. Maritana Sedysheva, 2011. "Building High Performance Strategy of Military Expenditures: The Utility Function in the Middle of Defence Budgeting," Annals of the University of Petrosani, Economics, University of Petrosani, Romania, vol. 11(4), pages 271-286.

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