Management accounting practices in Vietnam manufacturing companies: An epiridal study in Hanoi, Vinh Phuc and Phu Tho

The paper studies the status of management accounting practices in manufacturing companies located in three provinces of Hanoi, Vinh Phu and Phu Tho; at the same time looks into the level of satisfaction with information provided by management accounting in the surveyed companies. Quantitative research was conducted via questionnaires with accountants and managers in 161 manufacturing enterprises; statistics analysis provides three significant findings: (i) Vietnam manufacturing enterprises mostly apply traditional management accounting tools to support the process of control and short-Term decision making; (ii) new management accounting techniques such as strategic analysis, target costing, activity-based costing, etc. are not highly appreciated; (iii) the level of meeting information demand for management accounting remains low. Research findings are the foundations for making proposals to promote and enhance the application of new management accounting techniques in Vietnam enterprises in the present context of international integration and changing business environment

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where 1 = very dissatisfied and 5 = very satisfied. For the data analysis, one sample t-test was performed (Table 4). The results showed that among 7 objectives of the use of management accounting information, only 2 objectives are met with a significance level of 5%, they are: budgeting and planning, and product pricing; one objective is met with a significance level of 10%, that is cost control. Thus, the satisfaction level of informa- 8 Journal of Trade Science JOURNAL OF TRADE SCIENCE ’S JTS Table 2: The status of management accounting practices in studied enterprises (N=63) Management accounting practices in surveyed enterprises Application rate Ranking No. enteprises (score) Development stage High level Product costing and product pricing by absorption cost 96.8% 1 61 2 Budget for operational expenses 95.2% 2 60 2 Budget for cooperation amongs responsibilities within enterprises 95.2% 2 60 2 Job order costing or process costing 90.5% 4 57 2 Cost variation analysis 82.5% 5 52 2 Budget for cash flows 79.3% 6 50 2 Financial ratio analysis (ROI, ROA) 71.4% 7 45 2 Investment decision making (NPV, IRR, Time pay back_Tp) 69.8% 8 44 2 Moderate level Variable and Fixed cost analysis 65.1% 9 41 2 CVP analysis 61.9% 10 39 2 Segement reports 55.6% 11 35 2 Standard costing 44.4% 12 28 2 Variable costing and variable pricing 39.7% 13 25 2 Product profitability analysis 34.9% 14 22 2 Low level Life cycle costing analysis 28.6% 15 18 4 Customer, competitor and business environment analysis 28.6% 15 18 4 Financial performance evaluation 25.4% 17 16 4 Strategic forcast 20.6% 18 13 4 Shareholders/customer value analysis 17.5% 19 11 4 Value chain analysis 15.9% 20 10 4 Just – in – time inventory system (JIT) 15.9% 20 10 4 Economic – order- quantity (EOQ) 12.7% 22 8 3 Flexible budgets 12.7% 22 8 2 Target costing 9.5% 24 6 4 Acitivty-based budgeting (ABB) 7.9% 25 5 4 Acitivy-based costing (ABC) 7.9% 25 5 4 Balanced score card (BSC) 4.7% 27 3 4 Kaizen costing 0% 28 0 4 tion provided by man- agement accounting practices in meeting management demands in Vietnam enterprises is still quite modest. One sample t-test continues to be used for final question: "Overall assessment of manage- ment accounting prac- tices in your compa- nies"; mean value is 3.55, but sig. = 0.667> 0.05 with test value = 3.5. Thus, it can be con- cluded that the overall scores of management accounting practices in manufacturing enter- prises in Vietnam are only at 3.5 points, so the ability to meet enter- prise management i n f o r m a t i o n demands remains low. Furthermore, oneway ANOVA test is computed to see if there are differences among enterprises in terms of ownership structures in the sat- isfaction level of m a n a g e m e n t accounting informa- tion (Table 5). ANOVA analysis showed no difference in satisfaction levels between groups of enterprises by owner- ship structures (sig. = 0.470> 0.05). So it can be confirmed that the ability to meet the information needs of 9 journal of Trade Science JOURNAL OF TRADE SCIENCE ’S JTS Table 3: The role of managerial accounting applications in enterprises (test value = 3.5) One-Sample Statistics N Mean Std. Deviation Std. Error Mean For cost control purposes 63 4.2097 .94326 .11979 For budgeting and planning 63 4.0806 .94606 .12015 For performance evaluation 63 3.9839 .89611 .11381 Product princing purposes 63 3.9500 1.03623 .13160 Management reporting 63 3.8500 1.20450 .15422 Short-term decision making 63 3.7341 1.03211 .13325 Long-term decision making 63 3.6426 1.07080 .13824 One-Sample Test Test Value = 3.5 t df Sig. (2- tailed) Mean Difference 95% Confidence Interval of the Difference Lower Upper For cost control purposes 5.924 62 .000 .70968 .4701 .9492 For budgeting and planning 4.833 62 .000 .58065 .3404 .8209 For performance evaluation 4.252 62 .000 .48387 .2563 .7114 Product princing purposes 3.377 62 .001 .45000 .1834 .7166 Management reporting 2.532 62 .014 .35000 .0734 .6266 Short-term decision making 2.758 62 .000 .23410 .0632 .6612 Long-term decision making .372 62 .711 .14260 .0659 .7511 Table 4: Management satisfaction level of current management accounting applications (test value = 3.5) ** sig. at 5%; * sig. at 10%. One-Sample Statistics N Mean Std. Deviation Std. Error Mean Budgeting and planning 63 3.9355 .88468 .11235 Product pricing 63 3.7966 .99619 .12969 Cost control 63 3.7581 1.06641 .13543 Management reporting 63 3.7167 1.05913 .13673 Performance evaluation 63 3.7097 1.10716 .14061 Short-term decision making 63 3.5082 1.02669 .13145 Long-term decision making 63 3.4590 1.10414 .14137 One-Sample Test Test Value = 3.5 t df Sig. (2- tailed) Mean Difference 95% Confidence Interval of the Difference Lower Upper Budgeting and planning 3.876 62 .000** .43548 .2108 .6601 Product pricing 2.287 62 .026** .29661 .0370 .5562 Cost control 1.905 62 .061* .25806 -.0128 .5289 Management reporting 1.585 62 .118 .21667 -.0569 .4903 Performance evaluation 1.491 62 .141 .20968 -.0715 .4908 Short-term decision making .062 62 .950 .00820 -.2548 .2711 Long-term decision making -.290 62 .773 -.04098 -.3238 .2418 management accounting practices in manufacturing enterprises in Vietnam is still low and there is no differ- ence in satisfaction level among SOEs, joint stock, and limited liability companies. 5. Conclusion and Recommendation The findings of this study generate an overall pic- ture of management accounting practices in manufac- turing enterprises in three provinces: Hanoi - Vinh Phuc - PhuTho. The conclusions from this study can contribute to some extent to the theoretical and empir- ical studies on management accounting in Vietnam, and in transitional economies as well. The main findings from this study are: - The applications of management accounting in manufacturing enterprises in Vietnam are in stage 2 of Nishimura' model (2003) and at the same level of development in other countries in the region (Malaysia, Thailand, China). - The applications of management accounting in manufacturing enterprises in Vietnam are also in the transition phase towards the application of contemporary management accounting associated with strategic man- agement, although still at relatively low levels. These findings are to some extent differences in comparison with the conclusions of Nishimura (2002) and Doan (2012) but consistent with Nguyen's findings (2013). - The applications of management accounting in Vietnam manufacturing enterprises mainly focus on short-term goals, 'day-to-day' operations, such as budget- ing and planning, product pricing, and cost control. - The satisfaction level of management accounting information in Vietnam's manufacturing enterprises are still quite low and there is no difference in satis- faction level among enterprises in forms of ownership structures. The study results show that manufacturing enterpris- es in Vietnam still relies on traditional management accounting to provide information for management in the current business context. Therefore, the lack of infor- mation and the low level of satisfaction are understand- able. In order to promote the applications of advanced techniques of management account- ing, the following isues are recommended: - Review, renew and update the account- ing curriculums, textbooks and other learning materials for accounting and auditing majors in universities and colleges in Vietnam. - Improve management knowledge for both accountants and management of enterprises. Create the linkages between infomation demands of management and information supplies of accounting system within enterprise. - Enhance the applications of mathematical models through available enterprise management softwares, of which ERP is a typical example. - Apply new advanced techniques such as target costing, activity-base costing (ABC), Balanced Scorecard (BSC), value chain analysis ... in the current business environment, in line with demands and abil- itíes of enterprises. 6. Limitation and direction for future research Due to the sample includes the majority of small and medium manufacturing enterprises, so the findings may not represent the adoption of management accounting in large enterprises. On the other hand, the results of the study are limited in the manufacturing enterprises therefore they can not be generalized to enterprises of other fields. Moreover, the investigation carried out only within the manufacturing enterprises operating in three provinces, so the results can not be generalized to the whole country. In the future, it requires extended reseach comprising companies in various sectors, in different provinces in Vietnam. Simultaneously, the sample size should be increased in order to be able to apply not only quantitative but also qualitative research with case studies; as a result, it can be able to generate specific and deeper conclusions on the status of management accounting practices in Vietnam enterprises. References 1. Adams, H.A & Do, T.L. (2005), VNGAAP and VNGAAS: convergence to international account- ing and auditing principles. Hanoi: National Political Publisher. 10 Journal of Trade Science JOURNAL OF TRADE SCIENCE ’S JTS Table 5: ANOVA test Sum of Squares df Mean Square F Sig. Between Groups 1.244 2 .622 .766 .470 Within Groups 45.468 60 .812 Total 46.712 62 2. Ahamd, K. (2012), The use of management accounting practices in Malaysian SMEs. Doctoral thesis, University of Exeter. 3. Chenhall, R.H & Langfield-Smith,K. (1998) , Adoption and benefits of management accounting practices: an Australian study. Management Accounting Research, 9(1), 1-19. 4. Chan, Y.K. (2002), Management Accounting Practice in Singapore, a paper presented at the Asian Management Accounting Forum, November 1-4, 2002. 5. Doan, NPA. (2012), The adoption of Western management accounting practices in Vietnamese enterprises during economic transition. Unpublished doctoral thesis, Griffith University. 6. Ghosh, B.C & Chan, Y.K. (1997), Management Accounting in Singapore - Well in Place. Managerial Auditing Journal, 12(1), 16-18. 7. Huang, H., Lai, M.C., Kao, M., Chen, Y. (2012), Target costing, Business model innovation, and firm performance: an empirical analysis of Chinese firms. Canadian Journal of Administrative Sciences, 29(4), 322-335. 8. IFAC 1998, International Management Accounting Practice Statement: Management Accounting Concept, Financial and Management Accounting Committee, March 1998. 9. Joshi, P.L. (2001), The International Diffusion of New Management Accounting Practices: The case of India. Journal of International Accounting, Auditing and Taxation, 10, 85-109. 10. Lin, Z.J & Yu, Z. (2002), Responsibility cost control system in China: a case of management accounting application. Management Accounting Research, 13(4), 447-467. 11. Accounting Administration of the National Economics University; Thuongmai University; Academy of Finance; University of Economics of Ho Chi Minh City. Summary Baøi vieát nghieân cöùu thöïc traïng aùp duïng keá toaùn quaûn trò (KTQT) taïi caùc doanh nghieäp saûn xuaát (DNSX) thuoäc ba tænh, thaønh goàm: Haø Noäi - Vónh Phuù - Phuù Thoï; ñoàng thôøi xem xeùt möùc ñoä thoûa maõn veà thoâng tin do KTQT cung caáp taïi caùc DN khaûo saùt. Thoâng qua ñieàu tra ñònh löôïng baèng baûng hoûi ñoái vôùi phuï traùch keá toaùn vaø caùc nhaø quaûn lyù taïi 161 DNSX; phaân tích döõ lieäu thoáng keâ ñaõ cung caáp ba phaùt hieän quan troïng: (i) caùc DNSX Vieät Nam vaãn chuû yeáu aùp duïng caùc coâng cuï cuûa KTQT truyeàn thoáng nhaèm hoã trôï cho vieäc kieåm soaùt vaø ra caùc quyeát ñònh ngaén haïn.; (ii) caùc kyõ thuaät môùi cuûa KTQT nhö phaân tích chieán löôïc, chi phí muïc tieâu, chi phí theo hoaït ñoäng… chöa ñöôïc coi troïng; (iii) khaû naêng ñaùp öùng yeâu caàu thoâng tin cho quaûn trò cuûa keá toaùn coøn ôû möùc ñoä thaáp. Keát quaû nghieân cöùu cung caáp cô sôû cho caùc khuyeán nghò nhaèm taêng cöôøng vaø thuùc ñaåy vieäc aùp duïng caùc kyõ thuaät môùi cuûa KTQT taïi caùc DN Vieät Nam trong boái caûnh hoäi nhaäp quoác teá vaø moâi tröôøng kinh doanh ngaøy caøng thay ñoåi nhö hieän nay. 11 journal of Trade Science JOURNAL OF TRADE SCIENCE ’S JTS Pham Duc Hieu 1. Personal Profile: - Name: Pham Duc Hieu - Date of birth: 18 March 1970 - Title: Associate Professor, Ph.D. - Workplace: University of Commerce - Position: Lecturer 2. Major research directions: Accounting, Auditing and Corporate Finance 3. Publications the author has published his works: - Accounting and Taxation Journal - Journal of Economic Development - Journal of Modern Accounting and Auditing

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