Developments in Japanese Management Accounting and their Impact on British and New Zealand Companies

In recent years, there have been many changes in the economies of most industrialized countries resulting mainly from the impact of the oil crisis in the 1970s. In particular, it has led to rapid technological development and increasing competition in international markets. In particular, the Japanese economy has been afflicted with serious defaults and a frightening increase in business bankruptcies for more than ten years since the breakdown of the bubble economy in the latter half of the 1990s. As a result, business organizations have had to adjust and account for the impact of these changes. In such circumstances, every organization has been attempting to reduce costs while producing high-quality goods and services. Horngren (1989) points out that management accounting underwent substantial changes in the 1970s as a result of economic pressures. In the stable and optimistic 1960s, the notions of single person, single period, zero cost of information, easy access to information, certainty, and profit maximization had a dominant position in management accounting. However, by the 1970s, this had been replaced by feelings of uncertainty and pessimism. For the accountancy profession, this decade was characterized by multi-person, multi-period, costly information, asymmetric information across individuals, uncertainty, and utility maximization. Companies in Western countries have developed some control methods based on this idea. Their key objective is to avoid uncertainty and to cope with the shock of change with as little disruption to operations as possible. Enlargement of scale and scope seemed to be an effective method to realize this objective. As an organization becomes bigger and more diversified, it may be able to secure stability and certainty in the purchase of materials and sales of products. However, this traditional view is becoming increasingly unsustainable in the face of rapid economic change.