Accounting performance measurement: a review of its purposes and practices

International Journal of Business Performance Management

Volumn 3, Issue 2-4, 2001, Pages 245-260

  Otley, David ^a  

^a LANCASTER UNIVERSITY MANAGEMENT SCHOOL   (United Kingdom)

Author keywords

budgetary control systems; EVA; Financial management; financial ratios; management control; motivation; performance drivers; shareholder value

Indexed keywords

EID: 33646204087     PISSN: 13684892     EISSN: 17415039     Source Type: Journal    
DOI: 10.1504/ijbpm.2001.000102     Document Type: Article

References (14)

1. Such financial plans are often referred to as budgets and are widely used as a means of management control. However, this use is more concerned with management control than financial control, and will be discussed in later sections.
2. If ‘clean surplus’ accounting is used, total net cash flow and total profit are identical, in aggregate.
3. See [4] for a summary of evidence from the first two decades of ‘market-based’ accounting research.
4. Lev, B. (1989) ‘On the usefulness of earnings and earnings research: lessons and directions from two decades of empirical research’, Supplement to Journal of Accounting Research, pp.153–192.
5. A further form of responsibility centre, the revenue centre, is sometimes used. This is where the unit generates sales revenues, but is responsible only for the marketing costs of producing the products sold. Here the net revenue figure can be used as a measure of the success of the unit.
6. Note that this can be computed either by taking accounting income after interest charges and using the equity capital employed and its cost, or alternatively by taking profit before interest and using the total capital employed and the weighted average cost of capital (WACC). The numerical result should be identical; however, the latter approach is usually more easily applied in practice because capital employed can be measured by valuing the assets involved.
7. See [8] for an informed view of the benefits and limitations of using EVA as a tool for Value- Based Management. This book is a relatively balanced assessment of the EVA performance management system, unlike many others which have an evangelical flavour.
8. Young, S.D. and O’Byrne S.F. (2001) EVA® and Value-Based Management: A Practical Guide to Implementation, New York, McGraw-Hill.
9. Kaplan, R. and Norton, D. (1996) The Balanced Scorecard: Translating Strategy into Action, Harvard Business School Press, Boston.
10. Advocates of EVA would no doubt argue that EVA is an even better measure to use for these purposes.
11. Bunce, P., Fraser, R. and Woodcock, L. (1995) ‘Advanced budgeting: a journey to advanced management systems’, Management Accounting Research, Vol. 6, pp.253–265.
12. Otley, D.T. (1999) ‘Performance management: a framework for management control systems research’, Management Accounting Research, Vol. 10, pp. 363–382.
13. Weick, K.E. (1979) The Social Psychology of Organizing (2nd edition), Addison-Wesley.
14. Again, the EVA literature provides an excellent case study of how a particular accounting performance measure was adapted and refined from the more basic accounting data found in annual corporate reports.