Our presentation aims to explain the recent evolution of cost accounting through the identification of its investigation programmes. The origin and description of the five following programmes will be converted into necessary and sufficient indicators of the progress reached to this date by the discipline, especially during the last three decades.
• Programme focused on calculation of costs and valuation problems.
• Programme based on concepts and processes of planning and control.
• Programme on information of relevant costs for decision making.
• Programme on binomial technological cost-value.
• Programme on cost information in public and environmental entities.
The simultaneous relevance of these cost accounting programmes in the last decades, far from representing a doctrinal contradiction, has an internal cohesion meaning with the same essence as cost accounting (A. Rocafort and F. Martín.
1991).
3.2.Cost and valuation
In the origins of the Industrial Revolution of the 19th Century the initial posing of cost accounting to resolve problems as simple as the cost of industrial products arose and, as a consequence, to designate the necessary sale prices. In this pre- scientific period, the essential objective was the operating calculation of product costs. With posterity, now entering the 20th Century, the development of this focus puts emphasis on the valuation of factors and products, in the procedures and implementation of the cost system, in the distribution tables between direct and indirect costs, etc.
One of the most representative works of this focus was constituted by Th.
Lang (1944), in which four essential characteristics are combined: a) the preponderance of the informative character, analytical and of control, b) the analysis of the projected system to the cost of products through the aggregation of the distinct factors of cost, inventory control and types of production, c) the generalized use of inorganic or product costs, margining the meaning of cost localization, d) the beginning of formulae and variations of standard costs. In the same way as considered by Th. Lang, among the authors most representative
of the American school, in the European school, with certain clarifications, the Danish professor P. Hansen (1962) stands out.
This first programme, of the five listed also spans the focuses of direct costing (1940-1950) and ABC (1990’s): The ABC focus contains the precise elements which structure the calculation of costs referred to as the activities which occur in the sphere of the company, in whichever area of work and not only in production.
3.3. Planning and control
The formulation of this programme is owed in the majority to Continental- European authors. The assumption from the beginning is none other than the global modeling of business planning, projecting as a manifesto objective the determination of the internal result of the company.
The origin of this programme may be found in the School of Cologne, represented by Eugen Schmalenbach (1873 - 1955). A programme which crystallized in the proposal of Account Planning of Business Accounting. The Decree of 11th November 1937, in the period of Nazi Germany, collected the proposal. E. Schmalenbach formulated an account system incardinated to radical monism and, although it observes the limitations it may entail, proposes a decimal classification of the accounts. The French Accounting Plan of 1947, adapted in 1957 and revised in 1982, as much as the approval in Spain in 1978 of the Ministerial Order over Exploitation Analytical Accounting or Group 9 of the General Accounting Plan, design a countable planning attempt for internal accounting, in the way that this is the second investigation programme.
Plans facilitate computerization and, because of this, can provide an unquestionable usefulness. Once World War II had passed, the phenomenon of countable planning and standardization extended universally, backed by professional associations, the state and transnational organizations. The Accounting Plan for North American corporations came driven in the U.S.A. by the American Accounting Association and other organizations such as the AIA (American Institute of Accountants) and the AICPA (American Institute of Certified Public Accountants); in the scope of cost accounting, in 1971 and with the backing of the AICPA, the Congress of the United States created the Cost Accounting Standard Board destined to the emission of internal accounting norms and the calculation of costs, to initially establish this in companies the Defense Department was contracted, projecting a notable influence throughout the accounting profession.
In spite of the fact that the cited CASB (Cost Accounting Standard Board) disappeared in 1980, the significance of the norms which were emanated (CAS norms) is unquestionable: the 19 norms in force in its day have had a lasting impact on the accounting profession. The CASB which emerged through federal law in 1988 deal with the controlling of these norms, which performed an important part for the contractors of the time who operated with the state.
3.4.Decision making
This programme experienced a strong expansion in the 1960's and 1970's between cost accounting investigators, and this situation has repeated in present times. The intention to contribute is understood as a programme based on decision making, from the countable scope to the rational formation of prices and to conclude, the economical analysis of distinct business options from short to long term. Following this programme, the costs, as well as offering a base to determine profits, for the planning of results and for control, contribute valid information for decision making. Its decisional projection converts cost accounting into the information system positioned to provide, valid information for planning, the control and making of decisions.
C.T. Horngren (2008) affirms that “the essence of the administrative process is decision making”, and for this identifies management accounting with cost accounting. However, many mentors of the management accounting concept observe the insufficiency of traditional cost accounting to the effects of decision making, marking an evolution up to the amplitude of the field of investigation of the discipline. Management accounting would overflow, for its extension, into classical cost accounting, which remains implicitly integrated in the previous.
M.I. Blanco Dopico and S. Gago Rodríguez (1993) openly point that the lines of investigation of management accounting in the 1970’s and beginning of the 1980’s, went bound to management accounting as a decision system, management accounting as an information system and management accounting as a system of control.
3.5. The binomial technological cost-value
In the decade of the eighties, as a consequence of relevant technological development produced in the international economic sphere, criticisms of management accounting were formed which justified, maybe excessively, what came to be called the management accounting crisis. In essence, this programme
assumes to move the focus of interest towards the synchronization of the client's expectations (value) and the production of the product or service of the firm (cost).
A. Rocafort and F. Martin (1991) signalled three reasons which justified the criticisms mentioned: a) the evident fact that very few businesses use a very academically defined counting system and almost perceive it as superfluous, b) the appearance of new focuses and production management models (JIT, Lean Production), c) the existence of more and more refined information and telecommunication technology.
In this time P. Mevellec (1988) promoted “a revolution in the field of technical data collecting and in the form of understanding the processes of analytical accounting”. That time is now a reality, and as a more immediate consequence it is observed how the necessary time for the elaboration of the internal reports relative to cost control has inverted its structure, drastically reducing the time that the former inverted in the sampling and treatment of the production data phase.
The traditional focus of cost accounting had economic control of production as an objective. To the extent that the productive systems advanced in complexity, analytical accounting complicated in itself the methods of calculation and cost control. Specifically in that gradual complication of the accounting system is where some authors began to see one of the main weaknesses of analytical accounting against the current methods of production simplification.
In line with this programme, R.S. Kaplan (1988) cited the case of a transport company which considered itself satisfied with the operation control system in its more than five thousand centres. Difficulties arose when tariff restrictions were relaxed on the services offered. From then on the company considered it necessary – and managed to stabilize – a cost calculation and analysis system which allowed it to face the challenges of the competition.
For R.S. Kaplan a single system capable of satisfying the demands which the diverse functions of any cost system raises does not exist. Although companies can use a single method to obtain all the corresponding data for the transactions they perform, the treatment of that information demands independent and specific development depending on the recipients and the objectives.
In the same way the protracted and debatable classical analysis of the deviations is substituted by a simpler system of variations of the real costs faced with the estimated costs as competitive for a determined market. Beginning from the previous statement of inferior costs-objective to the actual costs of the
company, the evolution of the last with respect to those, still always registering unfavourable deviations, signals the level of compromise of the company with the purpose of continuous improvement and following reduction of costs. More than alarm signals for a given period, the new deviations are converted into an interesting chronological register of the progress (or deterioration) operated by the adopted production system.
3.6.Efficiency and control of public and environmental spending
It is generally accepted that a rising field of financial law is composed of the sector of legal order whose object is the control of execution of deposits and public spending. The sociological and political tendency which characterizes the last decades is projected in the economical field with requirements of financial transparency and of holding different types of control over financial activity.
Following J.M. Buchanan (2003) the political programme should contain a fiscal offer (of income and costs) which the citizen, by voting for one option or another, will assume, demanding one alternative or another. The tendency of control of public spending is directed towards two specific objectives: 1) eficiency control in the application of alternative resources to satisfy public needs; 2) Control of effectiveness of public spending.
The fiscal “revolution” at the end of the 1970’s in some states of North America came to capture the growing concern of citizens of information and control of state activity. Setting a precedent, the trial of budgets for programmes or the technique of a budget base zero are clearly accounting applied to the management of the public.
It fits to establish a costs information system based specifically not on management techniques and rendering of accounts to budgetary style, but, considering that it is necessary but insufficient, instigate the conscience of costs through the specific development of analytical accounting for the public sector.
An extension of this programme is the incorporation of a new sensibility which has overflowed into the doctrine of CSR (Corporate Social Responsibility) and also into rendering of accounts (accounting).* In spite of the fact that in this sector a great profusion of legal rules, efficient management of the limited resources is called to be a central element of accounting investigation for decision making in public entities, which exceed the budgetary focus and confer in administrative organizations the necessary decisive elements for an
* M. Kelly and M. Alam, Management Accounting and the Stock Value Model, JAMAR, vol. 6, nº 1 (2008), p. 76.
indispensable innovation facing international competitiveness of the economic group. The aforementioned programmes do not consider the environmental problem as a field of analysis of cost accounting.*
4. Conclusions
The investigation into and through the five programmes which remain open to investigators of cost accounting not only allows the demarcation of a wide field over which the scientific building of cost accounting has at present been constructed, but also the drawing of the evolution of the discipline, pointing to its immediate future.
However, and apart from the time of emergency of the Japanese challenge in the commercial field (1980’s), it is not possible to recognize the generational tensions foreseen by Kuhn for the moment of birth of new paradigms. This shows that accounting evolution can be explained through analysis and enumeration of investigation programmes, without need to fall back on paradigmatic changes.
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CLAIM RESERVING WITH FUZZY REGRESSION AND THE TWO WAYS OF ANOVA
JORGE DE ANDRES-SÁNCHEZ
University Rovira i Virgili Department of Business Administration Facultat de Ciencies Econòmiques, Reus, Spain
The mutant and uncertain behaviour of insurance environments does not make advisable to use a wide data-base when calculating claim reserves and so, quantifying provisions with Fuzzy Numbers becomes suitable. This paper develops a claim reserving method that combines Ishibuchi and Nii’s extension (2001) to the fuzzy regression method with the scheme for claim reserving proposed by Kremer (1982).
1. Introduction
Fuzzy Sets Theory (FST) has been applied successfully in several areas of Business Management as capital budgeting, accounting, marketing or human resources. Several outstanding examples are [9, 10, 11, 12]. Regarding actuarial analysis, one of the most interesting areas of FST is Fuzzy Data Analysis (FDA).
As Statistics, FST provides many techniques for searching and ordering the information contained in empirical data. Within an actuarial context, FDA has been used in several areas. So [7] and [17] use FDA for underwriting and reinsurance decisions, whereas [21] proposes using FDA for ratemaking and risk clustering. Likewise [1,14,15,21] adjust functions of actuarial interest with FST techniques.
Within claim reserving field, [1] adapts the schema developed in [3] to the use of Fuzzy Regression (FR) and [2] has extended Taylor’s geometric separation model also to the use of FR. In this way, the present paper proposes a claim reserving method that mixes FR with the methodology by Kremer in [16], which has been used intensively in actuarial literature.
The structure of the paper is as follows. In the next section we shall describe the aspects of fuzzy arithmetic and the FR method in [13] that generalises well- known Tanaka’s regression method [19]. Section 3 develops our claim reserving method. We then show a numerical application based on real data. Finally, we state the most important conclusions of the paper.