Studying and proposing solutions to improve management accounting of cost of road construction cost at civil engineering construction corporations under the MOT in the context of market economy and international economic integration.
MINISTRY OF EDUCATION AND TRAINING THUONGMAI UNIVERSITY - NGUYEN THI THAI AN MANAGMENT ACCOUNTING OF ROAD AND BRIDGE ENGINEERING CONSTRUCTION COST AT CIVIL ENGINEERING CONSTRUCTION CORPORATION UNDER THE MINISTRY OF TRANSPORT MAJOR: ACCOUNTING CODE: 62.34.03.01 Summary of doctoral thesis in economics Hanoi, 2018 Scientific instructors Assoc Prof Dr Do Minh Thanh Dr Nguyen Tuan Duy Scientific instructors Judge 1: Judge 2: Judge 3: The thesis is to be presented at the Thesis Council at the university level at ……………………………………………… At……… hour …… day ……… month ……… year …… The thesis is available at : - the National Library of Vietnam - the library of THUONGMAI UNIVERSITY PREFACE Urgency of the thesis topic Investment in transport infrastructure construction is considered a strategic solution to ensure that the goals of economic development and national defense and security are met During 2001-2015, there was breakthrough development in Vietnam's transport infrastructure in terms of scale expansion and quality improvement Domestic road and waterway transport routes were upgraded to meet the demand transport which enjoyed the anuual growth rate of above 10% In the Global Competitiveness Report of Transport Infrastructure during 2015–2016” by the World Economic Forum, Vietnam rank at No 67 out of 138 countries (compared to the position of 103/139 in 2010) According to the World Bank, the rapid development of transport infrastructure led to the continuously high annual growth rate of Vietnamese logistic market (at 16%-20%) The contribution of civil engineering construction corporations is vital to the development of the national transport infrastructure under the Ministry of Transport (MOT) These are leading companies in Vietnam in terms of transport infrastructure construction Thousands of kilometers of transport toad, hundreds of bridges of large and small scale connecting all regions of the countries have been built by engineers and workers at civil engineering construction corporations, which contribute to the national cause of industrialization and international economic integration There are unique and recordbreaking works such as Hanoi - Lao Cai express way, Nhat Tan bridge, Hai Van tunnel In carrying out the resolutions No.59/2011/ND-CP and 189/2013/ND-CP of the government, civil engineering construction corporations have been equitized since 2013 In addition tos opportunies, these corporations are also faced with many challenges To improve competitiveness, they need to find solutions to invest in technological upgrade and renovate the management mindset to utilize resources How to utilize management tools is a matter of utmost important and a regular task for company managers Therefore, the improvement of accounting activities in general and management accounting of engineering construction cost in particular is essential in providing necessary economic information for company executives to make appropriate and effective decisions The main tasks of management accounting of engineering construction cost are to collect, handle information about construction cost; supervise cost norms, create cost estimates and to provide and analyze information of engineering construction cost for planning and the decision-making process The main business field of civil engineering construction corporation is about building roads and bridges of large scale, complicated structure, long construction times and under the influence of weather elements Each of these transport works has to follow procedures and technical standards issued by the government The selling price is determined prior to construction; therefore, to make profit, construction companies need to apply advanced and appropriate construction measures to control cost factors well and reduce unit price Through studying the reality of management accounting at civil engineering construction corporations, the author chose the following topic for the doctoral thesis: “Management accounting of road and bridge engineering construction cost at civil engineering construction corporations under the Ministry of Transport.” The thesis aims to evaluate the reality and propose solutions to improve management accounting of road and bridge engineering construction cost at civil engineering construction corporations in the context of economic integration Overview of studies about management accounting of engineering construction cost 2.1 Local and international studies Firstly: studies about management accounting Studies about management accounting started in the 19 centuries regarding its fuctions, roles, and content Here are a number of representative works: In Advanced management accounting ((2015, Prentice Hall), authors Kaplan, Robert S., Alkinson, Anthony studied the establishment and development of management accounting at companies in the following basic contents: role, cost behaviour method, cost allocation according to activity-based costing (ABC) method, construction of cost centers at companies, cost items for the decision-making process; balanced scorecard method In “The use of management accounting practices in Malaysia SMES” (2012), Kamilah Ahmad studied the application of management accounting tools such as: classifying costs, making estimates, evaluating operating efficiency, strategic management accounting in small and medium sized enterprises in Malaysia There are also studies of author Nguyen Viet (1995) (“Improving accounting in Vietnam”) and Pham Van Duoc (1997) (“Direction for building content and applying management accounting at Vietnamese companies.” They pointed out differences between management and financial accounting; analyzed roles, functions, contents of management accounting and application at Vietnamese companies such as: classifying cost, making estimates, analyzing the relation among cost, volume, and profit and also cost fluctuation In “Direction for building the report system of management accounting and applying it in Vietnamese companies”, author Pham Quang clarified the theoretical framework of building the report system of management accounting at Vietnamese companies including the list of reports, purpose, function, structure and report methods In “Building management accounting at Vietnamese production companies”(2008), author Huynh Loi contributed to systemizing basic issues of management accounting such as: the role of management accounting at companies, model and application mechanism of management accounting model in all forms of production companies of different scales In “Improving management accounting at construction corporations under the Ministry of Defence” (2016), author Do Thi Thu Hang systemized theoretical issues about management accounting at construction companies and from that provided solutions to improve cost management, including the proposal of using modern costing methods There are also studies about specific industries such as: textile (Duong Thi Mai Ha Tram - 2004), and post and telecommunications (Nguy Thu Hien - 2012) They focused on specific issues of management accounting that are applied to specialized companies All studies concluded that the role of information provision of management accounting were not brought into full play Also, information provided by management accounting was not given enough consideration and investment All authors pointed out the role and function of management accounting regarding information provision for managers Secondly: studies about cost management accounting at companies in general Studies about management accounting can be divided into the following phases: Phase - before the 20th century: this is the establishment period of management accounting Management accounting applied analysis method of ratios and financial indicators to help managers manage business and production activities Phase - early 20th century to before 1970: break-even analysis and cost analysis methods were created for management accounting to control cost Phase - during the 1970s: management accounting was based on quantitative information to analyze cost information and behaviour; from that desired profit was determined to help management control cost and make decisions Phase - from the 1980s until now: management accounting was combined with strategic management to establish management methods such as: target cost, activity-based management accounting, balance scoreboard The establishment and development of management accounting and cost management accounting are divided into four different period It can be seem that cost management accounting started to be created in the second phase and begun to develop strongly in the 4th phase in line with modern management methods Cost management accounting is the combination of financial accounting and management accounting There are many foreign authors who studied about cost management accounting in enterprises, such as: In “Activity Based costing in New Zealand” (2005), Sarah Moll looked into information and superiority of ABC method This study also pointed out the difference between companies applying this method and those not regarding the advantages of ABC In “Activity-Based costing in supply chain cost management decision support systems” (2011), Amir H.Khataie studied and developed the ABC method for business and production cost; according to this, production cost is controlled and analyzed in the implementation process of each order In “Cost Accounting: Traditions and Innovations (1998), Barfield, Raiborn & Kinney studied and pointed out the differences between the two costing method: the ABC method applies criteria for allocating operating cost into cost objects based on the activities of cost objects; meanwhile in traditional costing method, cost allocation is done based on output volume or labor cost without relation to loss cost of cost objects In “Cost management: Accounting and Control” (1997), Hanson&Moowen pointed out the accounting content of responsibility centers for executives in an organization The system of responsibility accounting is established to promote goals among executives An article titled “Japanese Cost Accounting Systems - analysis of the cost accounting systems of the Japanese cost accounting standard” (MPRA Paper No 17117, posted T September 2009 15:28 UTC) by Winter Peter provided an in-depth study into cost accounting in Japan and from that systemized the Japanese system of standard cost accounting as well as compared the Japanese standard cost accounting system with the accounting systems in Germany and the U.S Locally, there have been many studies about cost management accounting since 2000, specifically: In the study named “Building the model of cost management accounting at Vietnamese pharmaceutical production companies” (2007), Pham Thi Thu Thuy provided a comprehensive overview about cost management accounting and application possibility for Vietnamese pharmaceutical companies; then proposed a model to improve cost control via classifying cost, making cost estimates, analyzing cost fluctuation, identifying each production lot’s appropriate scale, and evaluating the detailed performance according to each product, production unit and distribution branch With the study titled “Organizing management accounting of transport cost in Vietnamese road transportation companies”, Nguyen Thi Ngoc Lan (2012) provided an in-depth analysis of cost management accounting in a specific field: goods transportation That author proposed two methods of classifying cost (by the ABC method and cost behavior) and recommended the ABC method to help transport companies control cost better and have more accurate cost information In “Improving management accounting of transport cost at Vietnamese railway transportation companies in the context of international economic integration” (2012), Vu Thi Kim Anh studied and systemized basic theoretical issues and practical situation of cost management accounting at Vietnamese railway transportation companies in the context of international economic integration That author proposed recommendations to improve contents of cost management accounting in these companies, including: building the system of norms to control cost, classifying transport cost, building the system of norms, and cost estimates; providing transport costing methods; analyzing and evaluating cost implementation information to assist cost control and assess the responsibilities of management levels in railway transportation companies The contents of cost management accounting are also studied in specific fields, such as: in plastic industry by Nguyen Thi Mai Anh (2014), steel industry by Dao Thuy Ha (2015) [9], sugar cane industry by Le Thi Minh Hue (2016), cement industry by Tran Thi Thu Huong (2014), and medical industry by Vu Thi Thanh Thuy Thirdly: studies of management accounting of engineering construction cost at engineering construction companies In a study named “Cost accounting methods for construction projects in North- West Russia” (2009), Jouni Keisala looked into the superiority of ABC method, which includes all cost incurred in the accounting period (production cost, cost of sales and management cost) and allocated based on actual level for each activity and contribution to each activity during the production and distribution process Accordingly, the application of ABC method brings about more accurate results In a study named “A costing system for the construction industry in Southern Africa” (2015), Evans Mushonga analyzed the shortcomings of the traditional costing method in calculating construction unit price in South Africa That author believed that the application of ABC method would help companies identify accurately component indirect costs of the construction unit price The application of ABC method in costing was believed to be the key for the decisionmaking process of enterprises and the analysis of profit from construction contract That author also proposed that companies should apply both traditional and ABC methods at the same time The traditional costing method has the principle role of providing information for people outside the companies while the ABC costing method focuses on providing information for executives in deciding bidding prices and making estimates for engineering construction cost Nguyen La Soa (2016) presented a study named "Improving cost management accounting at Civil Engineering Construction Corporation 8" which helped to systemize basic theories about cost management accounting in engineering construction companies From that, that author proposed solutions to improve cost management accounting for subsidiaries of CIENCO8 according to contents that are closely related to the implementation of management functions such as: identifying cost, building the system of cost norms, improving the costing method via target cost and Kaizen costing methods, controlling cost via responsibility centers to serve the control and decision-making functions In her study named “cost management accounting at engineering construction companies in Hanoi”, Le Thi Huong (2017) systemized theoretical basis of cost management accounting at engineering construction companies and how the characteristics of their operation affect cost management accounting That author provided solutions to improve the classification of cost, building cost norms and making cost estimates and also propose using the method of identifying target cost for engineering construction companies in Hanoi 2.2 Research gap The author believes that there exits a research gap in management accounting, cost management accounting and management accounting of engineering construction cost to meet the management requirements in the context of market economy and international economic integration The author continues to inherit the results of local and international research; then studies and further clarifies several theoretical and practical issues related to management accounting of road and bridge construction costs at civil engineering construction corporations under the MOT From that, the author proposes solutions to improve management accounting of road and bridge construction costs at civil engineering construction corporations under the MOT during the period of international economic integration Research objectives and goals Research objectives: studying and proposing solutions to improve management accounting of cost of road construction cost at civil engineering construction corporations under the MOT in the context of market economy and international economic integration Research goals: + Systemizing and analyzing to clarify basic theoretical issues of management accounting for engineering construction cost in engineering construction companies + Studying, analyzing experience of cost management accounting of companies from developed countries, drawing lessons for engineering construction companies in generals and corporations under the MOT in particular + Evaluating the practical situation of cost management accounting at civil engineering construction corporations under the MOT, obtained results, shortcomings and reasons for shortcomings + Proposing solutions to improve management accounting of road and bridge construction costs at civil engineering construction corporations under the MOT Research questions To achieve research objectives and goals, the author focuses on studying, analyzing, and solving these questions: - What is the theoretical basis of cost management accounting in engineering construction companies? - What are operating characteristics of engineering construction companies that affect management accounting of engineering construction cost? - What is the practical situation of management accounting of broad and bridge construction costs at civil engineering construction corporations under the MOT and shortcomings to be addressed? What are solutions and recommendations to improve management accounting of road and bridge construction costs at corporations under the MOT to ensure information provision for management requirements during international economic integration? 11 construction cost such as: characteristics of product, mode of production, operation, and management 1.2 Engineering construction cost and requirement for cost management at engineering construction companies 1.2.1 Concept, nature, and significance of engineering construction cost The thesis studies many concepts of cost in general and engineering construction cost in particular from different scopes and perspectives Regardless, there are three required characteristics of cost: (1) cost is the loss of resources; (2) the lost of resources must be associated with the performance; (3) loss of resources must be assessed (measured by value) 1.2.2 Requirement for controlling construction cost - Building cost norms and cost estimates based on appropriate scientific basis and the practical situation - Controlling engineering construction cost according to each project and project category - Classifying cost classified scientifically and in accordance with standards - Controlling engineering construction cost in each unit to evaluate responsibility and performance of each unit - Regularly analyzing, evaluating cost categories and factors to have the basis for proposing solutions to cut down cost, reduce unit price and assists the decision-making process 1.3 Management accounting of engineering construction cost in engineering construction companies 1.3.1 Nature, role of management accounting of engineering construction cost in engineering construction companies The author concludes that: “Management accounting of engineering construction cost is a component of management accounting that collects, processes, provides and analyzes information about the past and the future to assist company executives in planning, controlling, evaluating performance and making decisions." The role of management accounting of engineering construction cost is shown in each management function as follows: Planning (identifying the goals to be achieved and outlines the steps to be taken 12 to reach these goals); implementation; evaluation of performance; decision-making (the combination of the above-mentioned functions) 1.3.2 Content of management accounting of engineering construction cost in engineering construction companies The thesis presents contents of management accounting of engineering construction cost, including: (1) Identifying and classifying engineering construction cost; (2) Building the system of norms and estimates of engineering construction cost; (3) Collecting implementation information of engineering construction cost for requirements of cost management accounting; (4) Analyzing information of engineering construction cost for management 1.4 Cost management accounting at companies in several countries in the world and experience lesson for Vietnamese companies Through analyzing the content of management accounting of production cost in the U.S, France, Japan, experience lessons are drawn for Vietnamese engineering construction companies in improving management accounting of engineering construction cost Firstly: Engineering construction companies need to identify and classify engineering construction cost; from that they need to choose the appropriate method of cost classification to help control cost effectively, which serves as the basis for creating cost target and estimates Secondly: Building the cost norm system as the basis to control cost effectively and compare the reality of implementation with estimates Thirdly: Applying modern costing methods to achieve the goals of cutting down cost With the operation characteristics of construction companies nowadays, modern methods of cost identification can be applied to provide useful information of managers For construction compaies that invest in modern machines and equipment for implementation, they can study and choose the method of identifying target cost Fourthly: Construction companies often apply the contracting method so they learn from the experience of companies in the US and France to establish resposibility centers, especially cost centers, to control cost and evaluate management responsibilty at cost centers 13 Fifthly: Companies need to study the models of cost management accounting in other countries They can apply the combined model of cost management accounting and financial accounting in the same accounting apparatus like in US companies CONCLUSION OF CHAPTER In chapter 1, the author clarifies general issues of management accounting of engineering construction cost in engineering construction companies: identifying how operating characteristics of engineering construction companies affecting management accounting of engineering construction cost and systemizing contents of management accounting of engineering construction cost in engineering construction companies including (1) Identifying and categorizing engineering construction cost; (2) Building the system of norms and estimates of engineering construction cost; (3) Presenting methods of identifying engineering construction cost, (4) Collecting implementation information of engineering construction cost for requirements of cost management accounting; (5) Analyzing information of engineering construction cost for management In addition, the author studies experience of applying management accounting of engineering construction cost at companies from developed countries to draw experience lessons for Vietnamese engineering construction companies Chapter REALITY OF MANAGEMENT ACCOUNTING OF ROAD AND BRIDGE ENGINEERING CONSTRUCTION COST AT CIVIL ENGINEERING CONSTRUCTION CORPORATIONS UNDER THE MINISTRY OF TRANSPORT 2.1 Overview of civil engineering construction corporations 2.1.1 Establishment and development of civil engineering construction corporations Civil engineering construction corporations under the MOT were established and developed during the Vietnamese war against the U.S 14 They are reputable contractors in the field of infrastructure construction for the transport industry After being transformed into corporations, they have made progress, firmly established their reputation and got recognized by reputable domestic and international organizations for the achievement and quality of transport infrastructure products 2.1.2 Production and business characteristics of corporations that affect management accounting of engineering construction cost 2.1.2.1 Production, business characteristics of corporations a Business fields of corporations Building transport works; Building industrial and civil works; Providing construction investment consultancy; Providing design survey; Supervising transport works; Manufacturing construction materials… b Characteristics of products and working procedures Transport construction products are often made according to single orders.The same type of products is made at different places with different conditions and cost c Characterisics of the lump-sum mechanism Survey results show that these corporation are applying the following contracting mechanism: 51,11% applies the lump-sump mechanism by cost categories; 26,67% applies the work package mechanism, and 22,22% applies both mechanisms 2.1.2.2 Characteristics of management organization and financial management mechanism at corporations 100% of corporations organize their magement apparatus according to the online functional model They all operate according to the model of parent company - subsidiaries 2.1.2.3 Characteristics of accounting organization at corporations Survey results from 45 companies of corporations show that: 12 companies (29%) organize the accounting apparatus according to the centralized model and 33 companies (71%) apply the combined model (both centralized and decentralized) 2.2 Reality of management accounting of road and bridge engineering construction cost at civil engineering construction corporations 2.2.1 Reality of identifying and classifying road and bridge engineering construction cost at civil engineering construction corporations 15 100% of corporations identify and classify cost according to function, economic content and inductive ability 2.2.2 Reality of building the system of norms and estimates for engineering construction cost at corporations Survey results of the lump-sump mechanism basis and control of engineering construction cost in projects/project categories show that: 60% companies under these corporation contract execution teams and units according to the negotiated ratio among them; 40% have built the internal cost norms to contract and control engineering construction cost of projects/project categories The system of engineering construction cost norms in these companies includes: cost norms for material, labor, construction machine 2.2.3 Reality of collecting implementation information of engineering construction cost for management requirements Survey results show that engineering construction costs are collected and calculated according to the actual cost method; the cost objects are projects/project categories To collect implementation information of engineering construction cost for management requirements, corporations are based on the systems of accounting documents, books, reports of management accounting of engineering construction cost 2.2.4 Reality of analyzing engineering construction cost information for management Survey results of which methods corporations use to analyze engineering construction cost for management show that: * Analyzing differential cost for cost management: 100% of corporations compare and analyze difference in actual cost with cost the precious period or with estimates based on the total number amount and each incurred cost category * Analyzing appropriate information to assist the decisionmaking process: Civil engineering construction corporations often have to make such business decision as: bidding price, price of lump-sump contract, selection of execution method, decision to continue or end the operation od a unit; investment, * Analyzing, evaluating the operation of cost centers: 100% of civil engineering construction corporations have not decentralized management and identified responsibility centers for cost control The 16 system of responsibility accounting has not been applied so the analysis and evaluation of performance of responsibility centers have not been carried out 2.3 Evaluating the practical situation of management accounting of road and bridge engineering construction cost at corporations Besides obtained results of management accounting of engineering construction cost at corporations, there are still shortcomings: * Because of the current identification and classification of cost, management accounting of engineering construction cost has yet provided information for the decision-making process of executives * About the system of norms and estimates of engineering construction cost: Civil engineering construction corporations have built the cost norms for material, labor and construction machine but not for general cost category They still rely on the norms promulgated by the government to build their internal cost norms In reality, no enterprise builds the complete system of cost estimates like mentioned in the content of Chapter * About the method of identifying cost: To recognize cost, corporations apply the method of identifying engineering construction cost according to works and the method of calculating and allocating cost according actual cost These methods have simple information collection procedure; however, they only provide production and unit cost information for executives at the end of the accounting period Information about engineering construction cost is received after the implementation process is completed so it is difficult to reduce cost and unit price of projects/project categories *About the method of collecting accounting information of road and bridge engineering construction cost at civil engineering construction corporations: The systems of accounting accounts, documents are not adequate to collect useful information for management accounting The system of accounting books have yet satisfied the requirement of providing information for management accounting of engineering construction cost in creating cost estimates, controlling and analyzing cost 17 * About cost management accounting reports: They are not adequately created to provide information of engineering construction cost to help executives make decisions Reports about management accounting of engineering construction cost, if any, are still spontaneous and inconsistent * About analyzing engineering construction cost to assist the decision-making process: Most corporations have yet analyzed cost fluctuations to help executives control cost Cost centers have yet been established so the analysis of cost to clarify cost fluctuations and the reasons for fluctuation has not been done Corporations have not assigned responsibility of management level for each cost fluctuation at units related to production cost CONCLUSION OF CHAPTER In Chapter 2, the author studies and analyzes the reality of management accounting of road and bridge engineering construction cost at corporations under the MOT The author analyzes the characteristics of operation, management organization, accounting organization that affect management accounting of road and bridge engineering construction cost Also, the author synthesizes research results about the reality of management accounting of engineering construction cost according to the following contents: identifying and classifying engineering construction cost; building the system of norms and estimates of engineering construction cost; presenting the method of identifying engineering construction cost; establishing the report system of engineering construction cost in management accounting and analyzing information of engineering construction cost to assist the decision-making process The author evaluates strong points and shortcomings as well as analyzes reasons of such shortcomings Studied results in chapter serve as the important basis for the author to propose solutions to improve management accounting of road and bridge engineering construction cost at corporations under the MOT 18 Chapter IMPROVING MANAGEMENT ACCOUNTING OF ROAD AND BRIDGE ENGINEERING CONSTRUCTION COST AT CIVIL ENGINEERING CONSTRUCTION CORPORATIONS UNDER THE MINISTRY OF TRANSPORT 3.1 Development orientation and strategy of corporations under the Ministry of Transport The development of corporations in the coming years can be generalized as follows: general orientation; strategic shareholder and partner association orientation ,orientation for industry and products; technology; intensive reform of company management 3.2 Requirements to improve management accounting of road and bridge engineering construction cost at corporations in the context of international economic integration - Provide information that meets management requirements in the context of international integration - Conform with characteristics of production, business and company management organization - Satisfy the goals of controlling cost of corporations - Ensure feasibility and effectiveness 3.3 Solutions to improve management accounting of road and bridge engineering construction cost at civil engineering construction corporations 3.3.1 Improving the identification and classification of engineering construction cost The author proposes the classification of road and bridge engineering construction cost in relation with activity level and scope of cost control + Road and bridge engineering construction costs are classified according to the relation with activity level into fixed cost, variable cost and combined cost + In classifying road and bridge engineering construction cost according to the scope of cost control, cost incurred at teams, units, departments are classified into controllable and uncontrollable costs so assign the responsibility of controlling cost for each cost center 19 3.3.2 Improving the establishment of norms and estimates system of road and bridge engineering construction cost 3.3.2.1 Improving the establishment of norms and estimates system of road and bridge engineering construction cost To accurately identify road and bridge engineering construction cost, corporations should combine the methods of analysis-research, statistics-experience with economic-technical analysis to build norms for each cost type + Improve the establishment of quantitative norms + Improve the pricing system The pricing system includes cost of materials, labor, and construction machine calculated for one unit of work volume or construction structure The costing system specifies cost for each construction work; it is built based on the system of economic-technical norms and pricing system The author proposes using norms for each cost and divide into fixed cost and variable cost 3.3.2.2 Improving estimates for road and bridge engineering construction cost * Grounds for creating estimates of road and bridge engineering construction cost: Based on circulars, decrees and guidelines of the Government, provinces and cities; contracts between the investors and companies (projected winning price); internal norms: labor norms (labor waste norms) unit price of working shift, internal labor unit price; construction organization measure; market price: The actual market price surveyed at the area of construction works * Method of creating estimates of road and bridge engineering construction cost: To help corporations control and save cost as well as to calculate profit in the production process, it is possible to create estimates of road and bridge engineering according to the relation between cost with activity level and be flexible according implemented volume and price variables 3.3.3 Improving the collection of road and bridge engineering construction cost information for management requirement 3.3.3.1 Method to identify engineering construction cost The author proposes that corporations apply the target costing method to identify engineering construction cost and meet the cost 20 information requirement of company executives in making timely cost control decision, which help reduce the unit price of construction products The application of target costing method to identify engineering construction cost is done with the following steps: Step 1: Identifying target cost of each implementation process of road and bridge construction Target cost is calculated for each work category to construct the finished work volume The calculation of target cost for each work should be based on evaluating each work process’s importance; target cost can be adjusted while total cost remains unchanged Step 2: Implementing the goal of cutting down road and bridge engineering construction cost This process combines actual results of engineering construction cost in each implementation process so that the cost can be adjusted appropriately according to the significance of each process Actual cost can be calculated for total construction work volume; if the actual cost is higher than target cost, it is necessary to look into cost fluctuations in each work category and find out the reasons to adjust, control and make appropriate cost reduction; this helps corporations control costs and achieve the projected target cost Step 3: Evaluating results of reducing road and bridge engineering construction cost When the implementation process of cutting down engineering construction cost is estimated to complete, it is necessary to evaluate the results in management accounting of engineering construction cost through comparing the initial target of engineering construction cost reduction with the actual implementation results If the actual cost is lower than the target cost, goods results are achieved for target profit and engineering construction cost In case actual cost does not surpass ceiling cost but is equal to target cost, corporations need to check the implementation procedures in all processes to cut down cost appropriately In this scenario, the consistent application of management tools, such as applying technology in construction and coordination among functional units in civil engineering construction corporations are important to achieve the goal of reducing incurred engineering construction cost 21 The author proposes that civil engineering construction corporations establish cost centers according to the online functional management model; they are divided into two groups: under construction units and under the management unit 3.3.3.2 Improving collection of implementation information of engineering construction cost for management requirement + The document system to collect initial information of engineering construction cost: To effectively carry out management accounting of engineering construction cost, it is necessary to establish and improve the accounting document system Accounting documents related to road and bridge engineering construction cost need to ensure comparability between actual cost and estimated cost + Improving the accounting account system for management accounting of road and bridge engineering construction cost according the location where cost is incurred: In the author’s opinion, cost accounts need to be recorded in detail to meet the requirement of financial accounting and cost management accounting Through encrypting account codes and applying software, it is quick and efficient to synthesize data for cost management accounting report in construction + It is necessary to establish a synchronized system of accounting books for management accounting of engineering construction cost, including: accounting books for direct material cost, direct labour cost, construction machine, general production cost, work in progress At present, account books of civil engineering construction corporations have not met the requirement of providing information to create estimates sand analyze information of management accounting of engineering construction cost + Improving the report system of management accounting of engineering construction cost: Based on the practical issues at corporations, the author proposes two report systems: (1) Segment reports; (2) Reports to provide information for decision making 3.3.4 Improving analysis of road and bridge engineering construction cost for company management 3.3.4.1 Improving analysis of differential cost for controlling engineering construction cost 22 To help executives at construction corporations have necessary information about differential cost, its is necessary to analyze cost based on specific factors that cause such cost to incur 3.3.4.2 Analyzing criteria of evaluating performance of cost centers The aim of responsibility reports is to provide information to evaluate responsibility in managing and using cost at units Through these reports, the head of each unit can manage cost effectively; executives can have grounds for solutions of cutting down cost 3.4 Implementation conditions of solutions to improve management accounting of road and bridge engineering construction cost at civil engineering construction corporations 3.4.1 From the government and state agencies The government need to create a favorable environment for the development of management accounting The Ministry Finance should issue circulars that provide guidelines in more details about the method, scope and content of applying management accounting in types of business There should be supporting policies in place so that companies can assess and apply management accounting of engineering construction cost from developed countries It is necessary to have standard training programs about management accounting of engineering construction cost at universities with upgraded content and teaching methods Regarding content, modern management accounting methods of engineering construction cost should be put into the teaching program 3.4.2 From civil engineering construction corporations Regarding the competence of accountants: Company executives need to know clearly what information they need and have specific requirements for accountants In addition, they should provide clear information orientation via business strategies and goals Long-time accountants should receive additional training to improve their knowledge of management accounting; new accountants must pass training of management accounting before being recruited About organizing operating: This has to be done based on specific conditions, business scale, and financial management mechanism of civil engineering construction corporations They should improve the management mechanism by decentralizing management level In addition, they should identify the relation among units and mong members of the accounting apparatus It 23 is necessary to proactively build the apparatus of management accounting of engineering construction cost and from that step by step apply the contents of management accounting of engineering construction cost appropriately and improve the internal supervision system The connection between management accounting of engineering construction cost with technology should be improved CONCLUSION OF CHAPTER Based on general theoretical foundation of management accounting of engineering construction cost and study about the reality of management accounting of road and bridge engineering construction cost at civil engineering construction corporations under the MOT in chapter 2, the thesis studies the improvement of management accounting of road and bridge engineering construction cost at these corporations as follows: improving the classification of engineering construction cost in relation with activity level and scope of cost control; improving the creation of internal system of norms and estimates of engineering construction cost; improving the recognition of cost information in accounting documents, accounts and books; improving the identification of engineering construction cost according to target cost method to control engineering construction cost effectively; improving the report system of management accounting of engineering construction cost; improving cost analysis to serve management requirements To implement solutions of management accounting of road and bridge engineering construction cost, the author provides recommendations for the government and corporations CONCLUSION In the context of international economic integration, civil engineering construction corporations need to have accurate and effective policies in business management and operation which need to be based on useful cost information provided by management accounting of engineering construction cost The study about management accounting of road and bridge engineering construction cost at civil engineering corporations under the 24 MOT helps them have new management tools and increase operating performance The thesis presents basic issues of management accounting of engineering construction cost as follows: + The thesis analyzes the operating characteristics of engineering construction companies that affect management accounting of engineering construction cost in engineering construction companies The thesis also systemizes basic contents of management accounting of engineering construction cost in engineering construction companies and studies production cost management accounting in several countries in the world to draw experience lessons for civil engineering construction corporations + The thesis analyzes and evaluates the reality of management accounting of road and bridge engineering construction cost at civil engineering construction corporations under the MOT according to the following content: analyzing characteristics of business organization, products, organization of management apparatus and accounting apparatus, accounting policy, financial mechanism that management accounting; points out obtained results, shortcomings and reasons for shortcomings + Based on theoretical grounds and reality of management accounting of road and bridge engineering construction cost at civil engineering construction corporations, the thesis proposes solutions to improve management accounting of road and bridge engineering construction cost at these corporations and meet management requirements through: improving the classification of engineering construction cost; building norms and estimates of engineering construction cost; presenting methods of identifying engineering construction cost; improving the collection of implementation information of engineering construction cost to meet the management requirements such as: the system of accounting documents, accounts, books, reports; analyzing engineering construction cost to meet management requirements To ensure feasibility of solutions, the thesis provides conditions to improve management accounting of road and bridge engineering construction cost at civil engineering construction corporations that require the co-ordination of the government, the transport industry and corporations themselves LISTED OF PUBLISHED WORKS OF THE AUTHOR Nguyen Thi Thai An (2012) “Cost management accounting in the U.S and experience lessons for Vietnamese companies”, Americas Today Journal, issue 168, March 2012, page 45-50 Nguyen Thi Thai An, Vuong Thi Bach Tuyet (2013) “The difference in cost and revenue accounting before and after VAS29” Journal of Auditing Studies, issue 72 October 2013, page18-23 Nguyen Thi Thai An, Vuong Thi Bach Tuyet (2015) “Designing calculation table and allocation of fixed asset allocation at Civil Engineering Construction Corporation 8”, Journal of Accounting and Auditing issue 04/2015, page15-18 Nguyen Thi Thai An, Vuong Thi Bach Tuyet (2016) “Organizing responsibility accounting in production companies”, Journal of Financial Accounting, issue 638 September 2016, page 73-75 Nguyen Thi Thai An, Chu Thị Bích Hạnh (2016) “Criteria for evaluating useful information in governance accounting report application for Vietnamese companies”, Proceeding of international scientific conference organized by Vietnam Association of Accountants and Auditors on “Management accounting - international experience and practical situation in Vietnam”, August 2016, page 326-332 Nguyen Thi Thai An (2016) “Applying the method of identifying production cost according to activity level to calculate unit price in engineering construction companies”, Journal of Auditing Studies, issue 108 October 2016, page 25-30 Nguyen Thi Thai An (2017) “Applying modern cost management accounting method to identify cost in transport construction companies ” Journal of Accounting and Auditing , issue165 June2017, page 47-50 Nguyen Thi Thai An (2017) “A study on factors affecting cost management accounting at Vietnamese engineering construction companies”,” Journal of Accounting and Auditing, issue 170 November 2017, page 42-46 ... doctoral thesis: “Management accounting of road and bridge engineering construction cost at civil engineering construction corporations under the Ministry of Transport. ” The thesis aims to evaluate the. .. bridge engineering construction cost at civil engineering construction corporations 2.2.1 Reality of identifying and classifying road and bridge engineering construction cost at civil engineering construction. .. for civil engineering construction corporations + The thesis analyzes and evaluates the reality of management accounting of road and bridge engineering construction cost at civil engineering construction