Reasons for not changing to activity-based costing: a survey of Irish firms

Abstract

Purpose-This paper aims to report on a survey of medium and large Irish firms to ascertain reasons for not changing to more advanced costing techniques, namely, activity-based costing (ABC). Developments in technology and recent poor economic conditions would suggest that the technique could be adopted more by firms, as they make increased efforts to keep costs under control. Design/methodology/approach-A survey instrument was used to gather data drawing from the top 1,000 Irish firms. From a useable population of 821 organisations, a response rate of 20.75 per cent was achieved. Findings-Findings show a rate of adoption of ABC of 18.7 per cent, which is lower than previous studies in an Irish context. The level of information technology in firms is not a key factor for non-adoption. Instead, the main reasoning for non-adoption revolve around stable existing costing methods, which firms expressed satisfaction with. Originality/value-This research suggests the adoption of ABC is not necessarily driven by external factors such as technology and economic shocks, at least in the context of Ireland. It also suggests that costing techniques may be deeply embedded within organisations and are less likely to be subject to change.

Factors Influencing the Implementation of Activity-Based Costing: A Study on Malaysian SMEs

“…Furthermore, besides innovation and increased technology, the globalisation of products and services have created a competitive business environment hence, requiring data to be identified accurately and must be relevant to the cost and performance of the organisation's activities, thus the importance of the ABC method in today's environment (Ismail & Reddy, 2017). Initially, the adoption of ABC was slow due to the high expenditure involved in employing and sustaining the ABC system, however the ABC system has been used widely in countries such as the United States of America (USA) (Brierley, 2009), the United Kingdom (UK) (Al-Omiri & Drury, 2007), and Canada (Quinn, Elafi, & Mulgrew, 2017). This costing system has gained international recognition in not only developed countries but emerging economies such as China (Anderson & Young, 1999), Taiwan (Lou, Wang & Lan, 2017) and Malaysia (Ahmad, Teng, & Zabri, 2015;Maelah & Ibrahim, 2007) as they gain competitive advantages in the pursuit of globalizing their economies.…”

Problems with Activity-Based Costing Implementation in Polish and Lithuanian Companies

“…We were convinced that it would facilitate comparisons of company practice in Poland and Lithuania in terms of ABC implementation, and could contribute to modifying existing beliefs on the factors that influence the implementation process. What is more, our intention was to compare the results with research conducted in other countries Jinga et al, 2010;Wegmann, 2011;Dragija & Lutisky, 2012;Rundora & Selesho, 2014;Quinn et al, 2017). To the best of our knowledge, such a broad and comprehensive overview of ABC practice has never been performed in Polish or Lithuanian companies before.…”

“…According to the respondents, although the benefits of ABC were higher than the costs of its implementation, diffusion was low because of the perceived high implementation costs, the lack of IT resources, high labor input, the great detail of the system, and the lack of knowledge about ABC. The lack of interest in the ABC system was also studied by Clarke & Mullins (2001), ), ElGammal et al (2016, Quinn et al (2017) and Hudakova & Bajus (2015). All these studies indicated similar reasons for the slow diffusion of Activity-Based Costing, and the most frequently mentioned barriers to implementation included the high implementation and maintenance costs and insufficient knowledge of ABC among employees.…”

“…All these studies indicated similar reasons for the slow diffusion of Activity-Based Costing, and the most frequently mentioned barriers to implementation included the high implementation and maintenance costs and insufficient knowledge of ABC among employees. The lack of IT resources and other priorities were indicated as barriers in a studies conducted by , Quinn et al (2017) and Allain & Laurin (2018).…”

“…Akyol et al (2005) claimed that appropriate IT resources constituted an important factor that influenced the success of ABC implementation. Staff resistance to change (Pierce & Brown, 2004;Cohen et al, 2005;Quinn et al, 2017) and insufficient knowledge of ABC (Novak & Popesco, 2008;Wegmann, 2011;Lu et al, 2016;Joseph & Piorce, 2019) also caused concern among companies. One of the key factors that condition the success of ABC implementation is the understanding of the concept by employees at all levels; therefore, the implementation of this system must be accompanied by management's support and a training and promotion process (Daly & Freeman, 1997).…”