School of Accounting and Commercial Law – Te Kura Kaute, Ture Tauhokohoko: Centre for Accounting, Governance and Taxation Research

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Open Access
Costing Systems and the Spare Capacity Conundrum: Avoiding the Death Spiral
(Te Herenga Waka—Victoria University of Wellington, 2011) Bates, Ken; Bradshaw, John
We hear how firms have to become lean, eliminate non-value added activities and strive to maximise asset utilisation, but there are inevitably firms with excess capacity that need relevant information to manage the cost of the under utilisation of resources. In this paper we question whether cost system designers have been taking appropriate account of the capacity issue, and ask whether the costing systems employed are sufficiently adaptable for fluctuating levels of capacity utilisation. We note that the capacity issue has received diminishing attention in the literature since the 1960s, and identify the dangers of not identifying the cost of spare capacity. We demonstrate how improper cost system design or usage can draw the firm into the death spiral. This danger not only exists when moving into a recession but also when recovering and resuming growth. We describe two cases that demonstrate potential pitfalls and alternative approaches to the capacity issue. The manufacturing case is an SME with a traditional costing system that was hindering management‟s pricing and product mix decisions. Fortunately the death spiral was avoided as it was recognised that significant spare capacity was distorting costs and prices when the firm continued to base overhead absorption on budgeted production volumes. The service case relates to a large financial services company that implemented a complex activity based costing system and gained a much greater understanding of resource consumption and capacity utilisation, and hence established more effective cost control in their back office operations.
Open Access
A Game Theory Approach to Research on Lobbying Activities in Accounting Regulation: Benefits and Issues
(Te Herenga Waka—Victoria University of Wellington, 2007) Baskerville, Rachel F
There is a lack of consensus on the most appropriate methodological framework for studies of regulation and due process in order to provide robust outcomes and predictive potential. In addition to this diversity of approaches, research typically adopts a “single event focus” to an examination of due process and regulatory efficiency. The objective of this research is to examine the advantages and issues arising when methodologies offering a multi event approach are adopted; specifically the utility of game theory methodology in accounting lobbying research. The applications of game theory in previous studies in accounting research are summarised (the application to FASB voting rules, auditor client interaction, and accounting disclosure choices relevant to wage bargaining); and the theoretical basis for studies of lobbying behaviour is also reviewed. The standard model as currently utilised in research on lobbying activities is described; and an alternative dynamic model proposed. Four core issues arise in the application of such a dynamic model: identification of the master game and subgames; gradual or punctuated equilibrium; agency issues; and reputation effects. It is apparent from the application of game theory in other areas of accounting research, that evolutionary game theory offers a more comprehensive and dynamic model of real world events, based on multi period or sequential events. The proposed utility of a game theoretic model in accounting research on due process and regulation justifies further developments in this area.
Open Access
Tylor's Legacy in International Accounting Research
(Te Herenga Waka—Victoria University of Wellington, 2007) Baskerville, Rachel F
When Hofstede published the book Culture’s Consequences International Differences in Work Related Values in 1980, he established indices of culture; culture was to be a measurable variable in international business studies. Hofstede's theoretical basis is traced to a comparative approach established by George Murdock. The lack of use of Hofstede’s dimensions in mainstream social sciences is described. This is sourced to the nineteenth century scholarship of Edward Tylor, and the debate concerning "Galton's problem". Murdock took the occasion of the 1971 Huxley Memorial Lecture “Anthropology’s Mythology” to renounce his own adherence to this method, and to plead for a new association between anthropology and psychology. Such a shift was paralleled by Hofstede in 1991. It is suggested that there are other methods which may better advance international comparative accounting research.

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