Recognition of idle resources in time-driven activity-based costing and resource consumption accounting models

Despite its theoretical superiority over traditional volume-based costing models, the Activity-Based Costing (ABC) model has failed to replace traditional volume-based costing models in most organisations. In response to the problems of the model, Time-Driven Activity-Based Costing (TDABC) and Resource Consumption Accounting (RCA) models have been developed as costing models for next generation cost management systems. A key feature that distinguishes TDABC and RCA models from traditional volume-based costing models and the ABC model is the recognition of idle resources in resource pools.

This paper presents a discussion on implications of recognising idle resources in TDABC and RCA models on developments, maintenance and uses of cost management systems. A hypothetical case is presented to illustrate conversions of an ABC-based costing model to ones that are based on the TDABC and RCA models, and the resulting new allocation of resource costs.

Definition and quantification of assets

The word ‘asset’ was originally taken into the English language, from the Latin ‘ad satis’ and French ‘asez’, as a term used at law meaning sufficient estate or effects to discharge debts. It later came to be used in the sense of property available for the payment of debts. Assets were understood to be property (objects owned and rights of ownership) that could be exchanged for cash. The importance of factual knowledge of the money equivalents of property and debts, in managing mercantile affairs, was emphasised in accounting manuals during the eighteenth and nineteenth centuries. The rights of investors and creditors to factual up-to-date information about the financial state of affairs of companies, given the advent of limited liability, underscored the early company legislation that required the preparation and auditing of statements of property and debts. During the latter part of the nineteenth century the emphasis in accounting moved away from assets as exchangeable property to assets as deferred costs. Expectations took the place of observables. The abstract (expectational) notion of assets as ‘future economic benefits’ was embraced by accountants in the absence of rigorous definitions of the elements and functions of dated statements of financial position and performance. Assets are quantified financially by a heterogeneous mass of potentially inconsistent rules that, by and large, have no regard for the empirical nature of measurement. Consequently, accountants have failed to provide the community with up-to-date factual information about the financial state of affairs and performance of business entities - and, hence, with an informative basis for financial action.

Accounting for goodwill on consolidation

The issue of accounting for goodwill has caused considerable concern to accountants and academics. For over 100 years there has been diversity of views as to the nature, recognition and measurement of goodwill. Such diversity of views has contributed to the adoption of a variety of accounting practices for goodwill, which has lead to attempts to regulate practice by accounting professions in the Anglo-American world. The research conducted involves a literature review to identify the concepts and definition of goodwill and the criteria for its recognition and measurement. the investigation will then concentrate upon goodwill arising on consolidation of the financial statements of a group of companies. Major accounting practices will be examined, along with the requirements of the australian and mojor overseas professions on the issue. The findings of a study of listed Australian companies which investigated the accounting policies adopted for goodwill on consolidation before and after regulation of the issue and which sought views upon some of the conceptual issues involved are reported and discussed. Implications of the research for the Australian accounting profession will be addressed, and recommendations will be propsed together with a description of future research opportunities.

Corporate governance : some key challenges and opportunities for accounting researchers

The focus on corporate governance has grown exponentially over the last decade. As evidenced by the increasing number of codes of best practice developed by leading international bodies such as the OECD, the Commonwealth and CalPERS (refer Demirag et al. (2000) for a fuller list of publications), corporate governance reform has now become a key global issue. Not only do factors such as the increasing globalisation of financial markets, the growth in multinational corporations and regional economic developments motivate the need for good corporate governance, but the recent spate of large corporate collapses such as Enron and WorldCom in the United States and HIH Insurance in Australia clearly signal the urgency for significant improvements in corporate accountability and reporting.