The et al (2013) argue the Management accounting



Implementation of Modern Management Accounting Techniques and its Impact on Firms
Performance Based on Perspectives of Balanced Scorecard: A Filed Study in Industrial
Companies Listed in Amman Stock Exchange





Maher Al-khasawneh

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This Chapter
focuses on the following segments: the background of the study,  history of management accounting, origin and
evolution of management accounting, definition of management accounting, global
management accounting techniques, the importance of management accounting,
problem statement, objectives and questions of the Study, significance of the
study, the scope of the study and theoretical framework.

 Background of the Study

 All the
organizations whether industrial, service and commercial are using the
management accounting to help the managers to do their jobs that related
planning, evaluating, controlling and decision making process through provide
them with the cost accounting data, financial and non-financial information
(Legaspi, 2014; Sunarni, 2014), Mehrsa and et al (2013) argue the Management
accounting helps in the performance of those functions by provides data,
modification data, analyze and interprets data and facilitation control. These ways
made Management accounting as the accounting branch might be as connecting body
between the accounting and business management for the purpose of realizing
some objectives and targets (Akmese & Bayrakci,

The management accounting was first known as cost
accounting, the term of management accounting is used only came during the
1960,at that time the management accounting as a discipline was studied
separately after the academic visit by British accounting experts who were
supported by the Anglo-American Productivity Council (Shotter, 1999; Shuo &
Jian, 2015).

In 1998, The International Federation of Accountants
(IFAC) divided the evolution of management accounting into four stages (Shuo & Jian, 2015). The first stage
referred to time before 1950, methods were mainly used to budgeting and cost
controlling (Shuo & Jian, 2015). Stage two began from 1950 to 1979; the
approaches like decision-making analysis and responsibility accounting were
emphasized to provide information for managerial plan and control (Shuo &
Jian, 2015). From 1980 to 1989 was stage three, using analysis and technologies
during the production to reduce the excessive use of resources drew more
attention (Shuo & Jian, 2015).The last stage started in 1990, hotspot focus
on the value creation by improving the efficiency of resources usage which is
driven by the customers and shareholders and the inside organization (Shuo
& Jian, 2015). In the contemporary world, the function of management
accounting tends to be forecast based on the historical information analysis,
at the meanwhile, it also helps to strategic management (Shuo & Jian, 2015).

 Institute of
Management Accountants (IMA) defined management accounting by traditional                roles as ” The process of identification, measurement, accumulation,
analysis, preparation, interpretation, and communication of financial
information used by management to plan, evaluate, and control an organization
and to assure appropriate use of and accountability for its resources, management
accounting also comprises the preparation of financial reports for
non-management groups such as shareholders, creditors, regulatory agencies, and
tax authorities” (IMA, 1981).

But more recently, the definition IMA (2008) was “a profession that
involves partnering in management decision making, devising planning and
performance management systems, and providing expertise in financial reporting
and control to assist management in the formulation and implementation of an organizations
strategy”  (IMA, 2008).

Traditional management accounting as a discipline came under attack in
the late nineteen decade when Johnson and Kaplan (1987) claimed that in the USA
management accounting information had lost its relevance within organizations
and that managers were no longer able to make appropriate management decisions
using this information. The argument of Kaplan (1984, 1985) and Johnson and Kaplan (1987)
centered around four key areas. Firstly, that management accounting was driven
by financial accounting requirements and resulted in systems which provided
data for such a purpose but which did little to aid management decision making
within organizations. Secondly, that management accounting failed to
acknowledge advances in manufacturing technology and did not adapt to them.
Thirdly, that accounting research being conducted did not include study of
practice and accounting academics had lost sight of what was happening in real
organizations and were not able to forward good practice and innovation to a
wider audience. Finally, historically management accounting had been directed
over time to develop systems of effective cost management and further
developments had been halted.

In today’s, the fast changing in economic situation and increase of the
competitive that attributed to business innovations, advancement in technology
and the changing demand of customers, may compel the management to develop
business techniques and strategies that would guide an organization towards the
maximization of profits to survive (Friedl & Biloslavo,2009 ; Stefanou &
Athanasaki, 2012), The companies which have been adapting to this situation at
too a slow pace found themselves in trouble or simply ceased to exist (Afonina,

The main focus of managerial accounting has always been to improve the
organizational performance and profitability by providing relevant information
for planning, controlling and decision making. Over past three decades,
management accounting techniques has emerged as one of advanced issues in
accounting that concerns the pursuit of shareholder value and aiding management
in achieving organizational goals (Alsoboa et al.., 2015). Alleyne and Marshall
(2011) stated that, in today’s business environment, manufacturing organizations
are constantly encountering challenges, namely that of performance improvement.
The aim of most managerial activities is to improve the performance of the
organization. The core measures of financial performance include market share,
return on assets, return on investment, sales margin, and profit level,
capacity utilization (Elbanna and Alhwarai, 2012), and while the core measures
of non-financial performance includes employee attitude and moral, personnel
performance, customer satisfaction, product/service quality (Jusoh, 2010).
Management accounting techniques can assist organizations to improve
decision-making by combination between using both financial and non-financial
measures this is considered as more effective in improve performance (Khan et
al., 2011).

Management accounting techniques act as the key for necessary
information that plays a vital role at both operational and organizational
level, to face competition in the market and achieve goals organizations such
as maximize profit, going concern, growth, to and so on (Oluwagbemiga & et
al., 2014).So the responsibilities of the management accounting increased to
maintain its relevance in organizations, to adapt with the changing needs of
managers to support them in the tasks of related to planning, control,
performance evaluation, and decision making in an organization (Ashfaq & et
al.., 2014; Pavlatos & Paggios, 2008), where the traditional accounting
techniques such as standard costing, variance analysis, budgeting, and cost
volume profit analysis are no longer adequate because of  their inability to provide broad scope
information to fit to the new dynamic and global environment, thus would lead
managers to limit their focus on operational issues (Kaplan, 1984; Sulaiman
& et al.., 2004; AlMaryani & Sadik, 2012 ; Yap & et al.., 2013).
With this transformation in business environment push the organizations toward
to improve the management accounting techniques for improve organizational
performance through implement many sophisticated techniques such as Balanced
Scorecard (BSC), Activity Based Costing (ABC), Target Costing (TC), Total
Quality Management (TQM), supply chain management and Just in Time (JIT), by
focused on the concepts such as efficiency, managerial development, cost
reduction, customer focus, quality and innovation, which leads allows to
effectively adapt internal and external environmental factors (Watts & et
al., 2014; Ahmad, 2017).

Organizational performance is a key aspect in many studies in management
literature as it plays a pivotal role in developing, implementing, and
monitoring a strategic plan and setting the future direction (Teeratansirikool
et al., 2013). Organizational growth and progress is achieved only through
continuous performance improvement (Gavrea et al., 2011). Organizational
performance is an indicator that measures how well an organization accomplishes
its objectives (Ho, 2008). In today’s competitive market, organizations must be
able to evaluate their objectives through performance measurement approaches
such as unit cost, profit, and quality subjective (e.g. quality, satisfaction)
performances, and set up appropriate strategies to reach their goals. Many
organizations have found that over reliance on financial indicators to measure
performance will lead to short-term results (Johnson and Kaplan, 1987). Johnson
and Kaplan (1987) argued that economic value includes the value of both
tangible assets and intangible assets.

The BSC was developed by Kaplan and Norton (1992, 1996) to include
non-financial indicators as a part of a firm’s reporting system. From the
existing performance measurement tools, BSC is one of the most popular
management tools that is well known and understood as a comprehensive tool to
evaluate performance in the management literature (Molina et al., 2014; Nazari,
2014). Performance measures and strategies used in the BSC fall into four major
groups of financial, customer, internal business processes, and learning and
growth (Mehralian et al., 2017). The financial indicators include traditional
financial measures such as profitability, risk, and growth (Mehralian et al.,
2017). The customer indicators entail the relationship that an organization has
established with its desired customers such as market share and customer
satisfaction (Mehralian et al., 2017). The internal business processes
indicators are focused on the methods and practices used inside an organization
to create value and how those processes can be improved (Mehralian et al., 2017).
Finally, the learning and growth indicators are concerned with priorities to
create an environment that is conducive to organizational change, innovation,
and growth (Mehralian et al., 2017). The BSC framework can enable organizations
in monitoring, measuring, keeping track of their financial, and non-financial
performance in line with their strategy and vision (Mehralian et al., 2017; Kartalis
et al, 2013).