ACCOUNTING DECISIONS 173
incentives throughout the organization’ (p. 68). By contrast, another Hitachi factory
uses the number of parts as the allocation base in order to influence product
engineering to drive reductions in the number of parts. Standard costs are not
used in Japan as they are in the West. A market-driven target costing approach
‘emphasizes doing what it takes to achieve a desired performance level under
market conditions...how efficiently it must be able to build it for maximum
marketplace success’ (Hiromoto, 1991, p. 70). Overall, Japanese accounting policies
are subservient to strategy.
Williamset al.(1995) reported similar findings to Demirag and, taking a critical
perspective, asserted:
In Japanese firms financial calculations are integrated into productive and
market calculations; the result is a three-dimensional view which denies
the universal representational privilege of financial numbers. Furthermore
the integration of different kinds of calculation broadens out the definition
of performance and identifies new points of intervention in a way which
undermines the privilege of financial guidance techniques; in Japanese firms
the main practical emphasis is on productive and market intervention rather
than orthodox financial control. (p. 228)In Japan, production engineering knowledge has an equal or higher status to
accounting knowledge, with the result that, for example in Toyota, the ‘visible
benefits’ of lower inventory in the financial statements was outweighed by the
invisible production benefits, ‘especially the ability to run mixed model lines in a
small batch factory’ (Williamset al., 1995, p. 233).
Currie (1995) undertook a comparative study of costing and investment
appraisal for the evaluation of advanced manufacturing technology (AMT).
Research identified that Japanese managers were uninterested in new manage-
ment accounting techniques such as activity-based costing, since knowledge that
some products were more expensive to produce than others was not important
to product strategy decisions. On the contrary, expensive products were likely to
have strategic value to the company.
Japanese companies emphasize costing in the pre-manufacturing phase through
target and lifecycle costing (see Chapter 9).In investment decisions, Japanese
managers stress the qualitative benefits of AMT such as quality control, scrap,
rework, service costs, space saving etc. These are difficult to quantify. ROI measures
are considered unhelpful because the focus on short-term returns overestimates
the cost of capital and results in discounted cash flow hurdles (see Chapter 12)
being too high. Japanese companies did, however, use simple payback calculations
with targets of between two and five years.
Behavioural implications of management accounting..............
Hopperet al.(2001) traced the rise of behavioural and organizational accounting
research from 1975. In the UK, a paradigm shift occurred that did not happen in
the US (where agency theory – see Chapter 6 – has been the dominant research