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Andreas Hoffjan, Professor WHU – Otto Beisheim School of Management, Vallendar
Pascal Nevries, Assistant Professor WHU – Otto Beisheim School of Management, Vallendar
René Stienemann, Dipl.-Kfm. cronos billing consulting GmbH, Muenster
Comparative Management Accounting – Literature Review on Similarities and Differences Between Management Accounting in Germanic and Anglophone Countries
This paper compares management accounting practices in Germany, the UK and the USA and reveals a range of differences and similarities. The most significant difference is in the use of either the general-ledger concept or the two-circle system. Through following these varying approaches, further differences arise, e.g., the total lack of imputed costs in the Anglo-Saxon countries and different bases for calculated profits in Germany. German management accounting exerts a stronger influence on management, because in the Anglo-Saxon countries financial accounting figures are not regarded as being useful for internal decision making. Thus management in Germany relies much more heavily on internal calculations provided by management accounting. Management accountants in the USA and UK exert a much deeper impact on operational matters and are involved in broader fields of activity than their German counterparts. While Anglo-Saxon management accounting is also directed at shareholders, German management accounting is addressed at internal target groups alone. Apart from these differences, several important similarities could also be observed. Management accountants in all three countries have reasonably similar objectives and goals. Among the most important are the provision of information, participation in the management process and attempts to ensure rational decision making by management. In general, a converging approach in management accounting practice is observable.
1. Introduction The competitive environment in which companies operate is steadily becoming more challenging and demanding. Major corporate take-overs increase the demand for more sophisticated and advanced management accounting information in order to react appropriately to external market pressures. Multinational companies have to cope regularly with various different institutional environments, management practices, and cultural (mis)understandings between the respective countries. While, in this context, the field of financial accounting has already attracted considerable attention from the academic world at a comparative international level, the area of internal management accounting has largely been limited to approaches focussing only on individual countries. These approaches have been analysed thoroughly by national academic researchers and, as a consequence, influenced practices in other countries. However, in order to initiate a debate on the subject and to highlight best practices, as well as innovations and inefficiencies in the management accounting world, a sophisticated comparison, drawing on the differences and similarities between the observed countries, has only recently been conducted in the management accounting literature. Furthermore, “different labels, in different languages, are used to refer to management accounting around the world” (IFAC, 1998: 84). The relatively young discipline of comparative management accounting attempts to fill this gap in management accounting research, by determining the degree of diffusion of applied concepts and practices in different countries. Divergences should be analysed in order to learn from other language areas and to understand the approaches used. The present paper analyses the different characteristics of management accounting in Germany, the United Kingdom (U.K.) and the United States of America (U.S.A.). The intention of this paper is to highlight the differences between the observed countries and the effects they induce.
S. the U. section 5 summarizes the findings. Section 3 then introduces the general concept of comparative management accounting. In addition. Because the U. 2000: 25). 1999: 2. the inclusion of the U. In this context. For a start. 2000: 311).S. To a lesser degree. Therefore. BLAKE ET. it is often claimed that management accounting has its roots in the U.A. is considered essential in this comparative study. Many countries have been and still are influenced by new developments in American management accounting (SHERIDAN.. 2000: 123). 293). 2.4 The paper is organized as follows. because English is the dominant language in the world of business (PISTONI and ZONI. Methodology The present study concentrates on Germany.A. Finally. can be assumed as being fairly similar due to the common language.S. are among the dominant countries in Europe with respect to management accounting importance (BLAKE ET AL.K. the U. Germany and the U. and the U.K. Secondly. is the world’s leading economic power and thus of fundamental significance with respect to management accounting. Furthermore both. 1995: p.A.S..A. although having seemingly different management accounting structures and institutions. and has influenced accounting practices and developments in German management accounting (Otto. similar financial accounting orientation and the cultural proximity (CARR and .. the U. and the U.K. the following section 4 describes and compares the main aspects and characteristics of management accounting in Germany.A.K.A. 2000: 123). we explain the choice of the selected countries and the methodology used. many studies have revealed a significant impact of German management accounting on several other countries in the world (KEYS and MERWE. These countries have been selected due to various reasons. Based on the terminological specification of nationally diverging definitions of management accounting labels.S. continuously influence management accounting developments in other countries.A.. and U. this also applies to the UK. the U. and the U. First.S.S.AL.K.
OTTO (2000). STOFFEL analysed controllership in Germany. timeframe and methodological approaches (STOFFEL.5 TOMKINS. if nothing else is stated to the contrary. More recent empirical studies focussing explicitly on the comparative element of management accounting can be found in AHRENS (1997. in this paper. some general tendencies with respect to functional aspects of management accounting can be identified and will be discussed in this paper. In order to provide an overview of the state of the art in comparative management accounting. both countries will be treated commonly as ‘Anglo-Saxon’ or ‘Anglophone’ countries. JONES and LUTHER (2004) and HOFFJAN and WÖMPENER (2006).. In his comparative work. On a broader inter-country scale. 2006: 238).A. and France.S. The first step is to develop a framework for classifying the relevant literature. A similar study from LIZCANO (1996) deals with comparative management accounting in Latin America. HOFFJAN and WÖMPENER. the following literature review identifies current research streams and future research questions. As comparative management accounting is a relatively young discipline.1998: 215-6. ZIRKLER (2002). the studies were grouped into six different categories as presented in Figure 1: . 2000: 122). 1995: 1). The few studies published so far in this field of research do not claim to be representative of comparative management accounting in general. there are few studies dealing with this topic (BLAKE ET AL. BHIMANI (1996) focussed on differences and similarities in management accounting in Europe. STOFFEL’s (1995) study is one of the first to concentrate at length on controllership on an international level. 1999). Nevertheless. However. and also vary with respect to objectives. BHIMANI merely collected and published nation-specific results from eleven European studies without explicitly stressing the differences and similarities in detail. the U. In order to obtain an overview of the relevant comparative management accounting literature analysed in this paper.
The fifth and sixth categories are included in this categorisation for reasons of completeness. but are not considered as sufficiently relevant to merit further examination. due to potential cross-references from other countries. and deal simultaneously with comparative management accounting.1. If it is possible to observe how management accounting differs or converges between other countries. although these papers do not deal explicitly with the countries that form the focus of this paper. Although not dealing explicitly with comparative management accounting. but nevertheless have a direct or indirect influence on different perceptions of accounting in the various countries. these papers can be compared to one another. This category is included.K. Because they represent the characteristics and particularities of the specific countries. Principles of comparative management accounting 3. Topics such as culture do not deal explicitly with management accounting. In the fourth category.6 [Include Figure 1 here] The categories are ordered with decreasing relevance to our selected countries and comparative management accounting in general.S. the comparative element is highlighted again.A. all papers in the first group cover the countries Germany. In the third category. In the literature review. aspects closely related to management accounting are discussed from the respective country perspective. Comparative management accounting . The second group includes papers that deal with national management accounting from the respective countries. these papers are nevertheless useful for a deeper analysis. meaningful comparisons could possibly be made. 3. 30 papers could be included in the first category. Following this categorisation. the U. and / or U.
7 Comparative management accounting compares management practices and principles between countries and cultures in order to initiate discussion. 1999: 20). 2000: 25). KÜPPER. comparative management accounting aims at guiding techniques and practices towards convergence (HOFFJAN and WÖMPENER.. OTTO 2000: 38. the label management accountant is not commonly applied as a description of the occupation – neither in the English term nor the German translation (SHERIDAN.A. equivalences for the corresponding Anglophone meanings must be found. to highlight best practices. innovations and inefficiencies in management accounting. In this respect. German controlling is generally viewed as similar to the Anglophone management accounting in the relevant academic literature (SHERIDAN. WILLSON ET AL. BIRKET 1998: 487). that are comparable to those used in Germany (Otto. 2006: 241). 1999: 19). Although there is not such a demand for theoretical definitions in the U.. Managers can also achieve competitive advantages by applying innovative management accounting techniques from other countries or cultures (AMAT ET AL. . In order to compare the work of management accountants in the three countries. 3. In Germany for instance. 2005: 6). The discussion of controlling-related problems and innovations in Anglophone journals like Management Accounting Research. Management accounting versus controlling Terms like management accounting or controlling are neither equally used nor understood in all countries (AMAT ET AL. 2005: 6). Management Accounting Quarterly or Advances in Management Accounting can be regarded as an indication of the terminological proximity of German controlling and Anglo-Saxon management accounting (KÜPPER.S. 1995: 1. 1995: 1. the following chapter tries to examine whether deeper differences are identifiable from an initial view of the definition and terminology of both terms.2. 2003: 5. Additionally..
The first perspective defines management accounting from a narrow point of view.S. Management accounting is therefore an . and the U. interpretation. analysis. Labels like ‘internal accounting’. AMAT ET AL. Management accounting also comprises the preparation of financial reports for non-management groups such as shareholders. 2002: 17). Management accounting terminology and definitions in the U.1.” In this definition. (1999: 19) also observed that “the term management accounting implies different meanings across national boundaries”. Furthermore. A second. ‘enterprise reporting’ and ‘managerial accounting’ are widely used as synonyms for management accounting (ZIRKLER. creditors. much broader perspective is more common in the Anglo-Saxon countries. accumulation. and communication of financial information used by management to plan. such that the term refers mainly to internal cost accounting and internal calculations (MUSSNIG.2. 1996: 13. Given these different labels that are used for the same basic concept. measurement. which is characteristic of management accounting in the Anglo-Saxon countries (MUSSNIG. two different perceptions of the scope of management accounting can be observed in the relevant Anglo-Saxon literature (MUSSNIG. According to the NATIONAL ASSOCIATION accounting is defined as: OF ACCOUNTANTS (1981: 4) management “[…] the process of identification. In the Anglophone literature. it is evident that various terms are used for management accounting. HORVÁTH. a clear focus on financial information becomes apparent. 1996: 13. evaluate. it is noteworthy that the definition includes non-management reporting for taxation and regulatory purposes as part of management accounting (MUSSNIG. Zirkler. 1996: 13).8 3. In general. regulatory agencies. and tax authorities. 1996: 13). preparation. 2002: 18) and will therefore be used in this paper. 2003: 79).K. and control within an organization and to assure appropriate use of and accountability for its resources.
Therefore. Although the label controller can therefore be regarded as widespread in the Anglo-Saxon countries. STOFFEL. It can be regarded as an umbrella term for the general managerial process of planning. WILLSON ET AL.9 integral part of the management process. STOFFEL.K.2. 2005: 13. KÜPPER. While the term controller is commonly applied as stated above. Finally. controlling and controller are only similar with respect to the origin of the term in the Anglo-American countries. the term ‘controllership’ rather than controlling most often characterises the field of activity of the controller or management accountant in the Anglo-Saxon countries (OTTO. while various titles can be applied to the position of the CAO. because it emphasises the aspect of ‘control’ more than other also relevant responsibilities like reporting. for the chief accounting officer (CAO) especially in large companies. ”The modern controller does not do any controlling in terms of line authority except in his own department“ (HORNGREN 10). 1982: 98. 1995: 3. is the term controller. and U. rather than for all management accountants.2. Management accounting terminology and definitions in Germany . evaluating and controlling. ET AL. This difficulty concerning the job description of the controller is quite often referred to in the Anglo-Saxon literature. 2000: 26). The label controlling also raises some important issues. but not at the conceptual level (SIEGWART. 2005: 6). “the most common title used is controller”. its application is commonly reserved as a description of the highest-ranking management accountant in the corporation. the title controller may be an unfortunate one.A. management and planning. 1995: 9.. (2003: 11) observe that.S. Another label which is commonly applied in both the U. The authors also acknowledge that. as well as of reporting. controlling is only used as a description of the leadership process of the final stage in the managerial decision making process (STOFFEL. 1995: 10).
AHRENS and CHAPMAN 2000: 482. some similarities are evident. and U. not been so far discernible until the present (FREIDANK. 2003: 148-9. management accounting is defined and understood in a functional broader context. KÜPPER. All definitions cover the aspect that the responsibility of management accountants or controller’s is to support managers with relevant information so as to promote objective and fair decisionmaking. business managers in Germany generally use the term ‘controlling’ as a description of the field of activity of management accountants (BIRKET.. 2005: 6) and its definitions and interpretations are characterized by its great variety and diversity. therefore.K. 1998: 487. 1996: 13). Nevertheless.S. it can be observed that the majority of definitions focus on the decisionsupport function (BERENS ET AL. Comparing controlling with management accounting definitions.4f). in the Anglo-Saxon countries. Contrary to the purely practical approach in the U. While controlling concentrates more on internal accounting matters.. 2004: 47). . 1993: 400). 2005: 5) or define controlling as safeguarding managerial rationality (WEBER. it can therefore be argued that. 1996: 100. the coordinative function (HORVÁTH. 2004: 48). whereas controlling definitions. management accounting includes internal as well as external accounting aspects and can be seen as a general term for accounting as a whole (MUSSNIG. Despite this broader scope of management accounting. on the one hand. 2005: 3-.10 In contrast to the Anglophone label ‘management accounting’. JONES and LUTHER 2004: 4. KÜPPER. are comparably characterised by their greater universality (e. KÜPPER. WEBER. In this context.g. A widely-accepted definition of controlling in the German literature has. controlling describes the relatively young discipline of ‘Betriebswirtschaftslehre’ (business administration). 1995: 144). the basics of controlling have been developed within the academic literature (SCHERRER. on the other hand.A. AHRENS and CHAPMAN 2000: 482.
it is important not to treat this complex field too simplistically (HARRISON and MCKINNON. . femininity and long versus short-term orientation. as well as the economic situation of the particular country. masculinity vs. 1991: 5). 2000: 285. Chow et al. 1999: 441). collectivism. In the economic literature. due to a lower tendency towards individualism (CARR and TOMKINS.3.. whenever culture is quoted as an influence-factor on management accounting. 1999: 483). 1995: 290). Determinants of and influences on differences between management accounting processes To analyse why and how management accounting differs between countries. Culture as an influence factor in management accounting Culture can be defined as a “system of collectively held values” (HOFSTEDE. Using this framework. 1998: 218). on the one hand. can have an impact on diverging management accounting systems (PISTONI and ZONI.1. In this context. individualism vs.. Other factors such as academic and institutional background. for instance. However. it is commonly stated that the Anglo-Saxon world is more shareholder and stock-market driven. The most frequently-stated influence factor held responsible for differences in management accounting is culture (CHOW ET AL. uncertainty avoidance. many scholars do in fact refer to the German financial culture as more stakeholder driven (SHERIDAN. the cultural framework of HOFSTEDE is commonly applied by management accounting researchers to explain the variations between different nations and their cultures (CARR and TOMKINS. 1991: 209-10.11 3. Japanese business managers are characterised by more organisational commitment than their American colleagues.3. special attention is also paid to the differences in financial culture. Culture can therefore explain national differences in management accounting. it can be argued that. it is important to concentrate on the main determinants and key drivers that lead to such variations. While. on the other hand. SHIELDS. 1998: 217). 1998: 505-6). HOFSTEDE (2001: 373-4) developed the familiar five dimensions of power distance. 3.
German developments in management accounting are mostly based on new ideas and concepts from academics. because this paper focuses on the characteristics and consequences of these differences. 3. The occupational biographies of management accountants highlight the fact that the main route into the profession of management accounting is achieved via a university degree (AHRENS .12 Moreover. occupation and management accounting institutes as influence factors The respective educational and institutional situation also varies between the analysed countries and should be included in the comparative framework. German management accounting is highly educationally oriented (Jones and Luther 2004: 3) and there is no wellestablished institutional environment. and the U. Therefore.K. management accounting is based on a professional environment (AHRENS and CHAPMAN.2. 1999: 42). Although not all studies explicitly compare German with Anglo-Saxon management accounting institutions. all studies nevertheless mention either the highly sophisticated management accounting profession in the U. or stress the minimal institutional background in Germany. institutional bodies like the Chartered Institute of Management Accountants (CIMA) and the Institute of Management Accountants (IMA) represent the interests of management accountants in the Anglo-Saxon countries.K. AHRENS and CHAPMAN.K. JONES and LUTHER.S. Education.. Consequently.A. these studies are only considered peripherally.S. whereas Anglophone scholars have a reputation for focussing much more on practical research (AHRENS and CHAPMAN. Conversely. Furthermore.3.. 2000: 480. 2004: 4). rather than on their cultural causes.A. the analysed literature generally concurs with the statement that professional institutions for management accounting are more sophisticated in the Anglo-Saxon countries than in Germany. There are also differences between Germany and the U. management accounting in Germany can be characterised more as a discipline taught at university than a fully-fledged profession (SHERIDAN. with respect to the type of qualification of accountants that they acquire before applying for a job in accounting. and U. 2000: 482). 1995: 289. While both in the U.
3. 1998: 56).. are predominantly trained and qualified on the job. It can therefore be noted that education in German management accounting is predominantly acquired by means of an university degree in economics. . management accounting practices in Anglo-Saxon countries also include. 1995: 719-20).K.. for example. one could assume that both the target groups and the objectives of management accounting differ between these countries. Comparison of relevant management accounting concepts 4. 4. whereas accountants in the U. management accountants will inevitably adopt the latter’s practices. 3. 2000: 480-1). fluctuations continuously influence and affect different countries in different ways (GOLDSTEIN. one country has to cope with high levels of inflation. creditors and tax authorities. If. AHRENS and CHAPMAN (2000: 480) found that “all but one practitioner” in Britain had graduated in a subject that was not relevant to business or economics.1. Consequently.13 and CHAPMAN. the provision of financial reports for non-management groups like shareholders. Responsibilities and objectives of management accounting 4. In addition. However. as well as in other countries (BLAKE ET AL. Economic background as an influence factor In terms of economic background. by definition. 2000: 123). Objectives and target groups of management accounting In contrast to Germany. although with varying degrees of responsiveness. while in Germany.1.3. it is almost mandatory for management accountants to have graduated in ‘controlling’ or at least some other field within ‘Betriebswirtschaftslehre’. management accountants must consider these circumstances (BLAKE ET AL. if a country is dominated by the economic power of another country. The economic situation in a particular country can influence the management accounting practices in that country.1.
In Germany. CARR and TOMKINS.S. 1997: 557-8. it can be stated that all management accountants pursue the company goal of profit maximisation as well as that of supporting the management. WEBER. 2004: 2930. in contrast . the objectives of management accounting include ‘providing of information’ and ‘participating in the management process’.. it can be argued that management accountants in the observed countries share similar goals and objectives. 1993: 216. Therefore. 1995: 290). 1995: 132).K. consider themselves to be under high pressure to achieve short-term oriented goals. 1998: 217) The dominance for managerial decision making of stock markets in London or New York is often stated as a key argument for this short-term orientation of Anglo-Saxon managers (SHERIDAN.1. whereas countries like Germany and Japan are possibly more long-term oriented with respect to their business decisions (SHERIDAN. or the U. management accountants from the U. it becomes apparent that there are many similarities to the German understanding of management accounting objectives.14 According to the NATIONAL ASSOCIATION OF ACCOUNTING (1982: 24) in the U.. 4. KÜPPER. Furthermore. cultural background is also often cited as a reason for the differences between these countries. Analysing these objectives further. 1995: 290.2.K. MACHARZINA. In addition to economic reasons.S. 2003: 393. AHRENS. are short-term oriented. Drawing on empirical findings in the literature. long-term orientation (SHERIDAN. planning and governing (AMSHOFF. 2005: 11). COATES ET AL. Many scholars refer to the cultural model of HOFSTEDE (2001) for an explanation for the short-term vs. Long-term versus short-term goals A widely-discussed question in comparative management accounting literature is whether Anglo-Saxon countries like the U. despite a broader field of management accounting target groups in AngloSaxon countries compared to Germany. 1995: 290. the aim of management accounting is commonly described as that of ensuring rational managerial decision making as well as safeguarding the processes of controlling.
HOROVITZ (1978).K. he found that the same percentage of chief executives in Germany and the U. Finally. a growing similarity of the instruments used for both long-term and short term business-orientations is identifiable as well (COATES ET AL. SHERIDAN. thus agree on the short-term orientation of Anglo-Saxon countries in contrast to the long-term orientation in Germany (COATES ET AL.K. and the U. company payback periods are also shorter in the Anglo-Saxon countries than in Germany. 4.K. Hence.S. Management accounting versus financial accounting Creditor protection and the principle of prudence are historically strongly emphasised in German accounting.15 to their colleagues in Germany (AHRENS. use long-range plans (HOROVITZ. The findings from the literature are summarised in Figure 2: [Include Figure 2 here] Despite this apparent consensus in the literature. AHRENS.S. according to which German managers are longer-term in their thinking than their U.. In a long-term orientation index developed by HOFSTEDE (2001). because of a lack of questioning the reasons behind and the implications of these assumptions (AHRENS. according to the empirical study of CARR and TOMKINS (1998: 220). 1995: 131). 1998: 217). 2001: 356). (HOFSTEDE.A. stringent regulations concerning the reported content to outsiders . CARR AND TOMKINS. counterparts.3. 1997: 558). an excessively undifferentiated analysis of these stereotypes must be criticised. Similar results can be found in the comparative study of COATES ET AL. and Germany. Furthermore. 1978: 100). 1996: 149-50). found no significant differences between long-term planning in the U.1. 1997: 557-8.K. and U. for instance. 1995: 290. 1995: 132. In his comparative study. Germany is also ranked as only slightly more long-term oriented than the U. The majority of research discussed above. (1995: 127). assuming a convergence of management accounting practices as observed by the majority of scholars.
it can be observed that a much clearer split between financial and management . 2004: 13).).. management accounting and financial accounting are also treated as two separate fields of accounting activity. taxation authorities and other stakeholders such as creditors. Furthermore. Financial accounting is directed formally at the state. The former is responsible for reporting to the state. probably leading to a denial that financial accounting is a bone fide component of management (ibid. comparing the degree of separation.. external reports from financial accounting are sometimes considered as “not relevant to management decision making” in Germany (JONES and LUTHER. Consequently. 2002: 23. 2004: 13). Anglo-Saxon management accounting does not operate with imputed costs such as opportunity costs for managing owners. 2002: 112). 2002: 565-6). Anglophone accounting figures are based on the same business values that are used in financial accounting. Due to imputed costs. financial accounting is separate from controlling. 2004: 14). 2003: 262). as is common in German management accounting (ZIRKLER. MESSNER. as in Anglophone countries. profits calculated in financial accounts normally differ from those calculated in the management accounting system in Germany (BAETGE ET AL. and not primarily towards shareholders. However. Consequently. The latter concentrates on entrepreneurial or managerial efforts in order to fulfil managerial needs for relevant decision support (KEYS and MERWE. rather than economic needs inside the company. 1999: 7. In Anglo-Saxon countries. JONES and LUTHER.16 of the company can be observed in Germany (BAETGE ET AL. particularly with respect to the (German) legal and commercial codes and the tax regime (JONES and LUTHER. Because the data reported by financial accountants is based on the protection of stakeholders and is not relevant for supporting managerial decisions. financial accountants are driven by statutory requirements. Managers in Germany still emphasise that the numbers reported in the financial statements are not relevant for internal decision-making purposes. Their task is to emphasise legal requirements.
management accountants.S.K. which is responsible for financial management activities like reporting to investors and creditors or dealing with tax authorities (STOFFEL.S.1. Fields of activity for management accountants Comparing the fields of activity for which management accountants are responsible. 1985: 23-4). 2004: 13). management accountants (STOFFEL. 4.K. The key results from STOFFEL concerning the fields of activity of German and U. management accountants.S.S. is also uncommon. or the U.A. Indeed. with 97% being responsible for external accounting matters. . accounting show that management accountants agree with the definition of the NATIONAL ASSOCIATION OF ACCOUNTANTS (1981). 1996: 13-14. but a clear division of financial and management accounting of the occupational level as in Germany. are presented in Figure 3. financial accounting is considered to be relevant for only 21% of management accountants (ZIENER. [Include Figure 3 here] With respect to these findings and in conformity with the studies mentioned above.4. or the U. this has already been stated in the definition of management accounting from the NATIONAL ASSOCIATION OF ACCOUNTANTS (1981). many studies dealing with U. not only operates with the same data base as for financial accounting. While this common ground for activities may not be surprising. financial accounting plays a dominant role for U. 1995: 83). ZIRKLER. Conversely. internal cost management is regularly identified as being one of the main functions of management accountants in all observed countries (MUSSNIG. in Germany. Management accounting in the U.S.S. that internal cost management is relevant for 65% of German controllers and for 91% of the interviewed U. This is backed up by empirical findings. 1995: 156).17 accounting is prevalent in Germany than in the U. (JONES and LUTHER. 2002: 17).
German controlling is far more detached from cost accounting matters than Anglo-Saxon management accounting. This again becomes apparent in the relevance of accounts receivable. 1970: 2184. Further differences with German und U. because the fields of activity are positively correlated with the numbers of employees working in a company. Management accountants in both countries ultimately agree that budgeting and internal reporting are important aspects of management accounting – in contrast to the field of internal auditing. Therefore. the comparison reveals that it is still more frequently integrated into Anglo-Saxon management accounting than into German management accounting (ZIENER 1985. 1995: 113-14. the management accountant is responsible for a broader range of activities in all observed countries (WILLSON ET AL. Normally. management accountants are responsible. internal auditing can be described as operating closely together with the German controller. compared to 9% in Germany. but not necessary as being integrated into the controlling department itself (HORVÁTH.S. Finally.A. which is uniformly regarded as being rather less relevant for daily work. it is evident that. However. these results are only representative for corporations above certain levels of size (Otto. 1995: 93). neither of these two fields of activity is assigned to German controlling (STOFFEL. 2003: 14). in smaller firms. p. 1970: 2182).S. In Germany.. despite this low circulation of internal auditing. STOFFEL. management accounting can be found in the appropriate insurance of the corporation’s assets or the responsibility for computer services (HABERLAND. 1995: 93). 2003: 811. By contrast. WILLSON ET AL. (HABERLAND. STOFFEL.18 This is the most significant difference that can be identified between German and AngloSaxon management accounting activities. 2003: 4). internal auditing is regarded as a potential activity for management accountants in the U.S. 2000: 273)..2. 4. for which 66% of U. 23-4). Management accounting systems and instruments .
In this context. The key characteristic of this system is that the two .K. 775). 2003.2. both the characteristics. and the systems of management and financial accounting are also separated by the use of a ‘two circle’ concept. p. whereas the data used for financial accounting systems is characterised primarily by objectivity and auditability.1.A. a common data base named ‘general ledger’ is commonly applied (KAHLE. Concerning the former. While this general ledger system is widely accepted at an international level. management and financial accounting are separated to a high degree (as stated above). As in Germany. Contrary to Germany. That is. and effective manner” (KAPLAN and ATKINSON. proximity between internal and external accounting can nevertheless be observed in the sense that no two completely separated data bases are used in the AngloSaxon countries (KAHLE. In the following discussion. two different accounting circles apply to internal and external accounting (Messner. At first glance. and the U. 4. consequences and differences that arise due to this variation will be discussed. data relevance is regarded as one of the main aspects. 1998: 1). “with a reconciliation module provided to articulate between the two sets of statements at the end of the year when financial statements are prepared” (KAPLAN and ATKINSON. due to the different activites and accounting goals.. More specifically. efficient. Financial and cost systems are run independently in Germany. management accounting systems must fulfil other requirements than those of financial accounting systems.19 Management accounting systems are intended to satisfy managers’ needs and to motivate and assist them in achieving “their organizational objectives in a timely. 1998: 8). The general ledger system can be described as an integrated system that includes all accounts in the financial statements. General ledger versus two circle system The handling of data used for external and internal accounting needs is handled in different ways in the observed countries. there is a dividing line between financial accounting and management accounting in the U. 2003: 249). the twocircle or dual cost system is still the most commonly used in Germany.S. 2003: 775).
1997: 358. Consequently. ZIRKLER. they rarely appear in Anglophone management accounting theory and practice (ZIRKLER. 2002: 21). 1996: 105). 2002: 16). Significantly more management accounting information is used for external reporting in the U. for instance.A. 2002: 21. in Germany (ZIRKLER. compared to Anglo-Saxon countries. it can be assumed that the general ledger system is dominated by financial accounting data (ZIRKLER. WEBER. both financial accounting and management accounting therefore calculate with the same values and basics. JONES and LUTHER. As a consequence. with the use of imputed costs. and control procedures use monthly variances computed from general ledger financial accounts” (KAPLAN and ATKINSON. the potential scope for manipulation in the field of management accounting is greater in Germany. While imputed depreciation and interest are of great importance in German management accounting (SCHERRER. A further significant difference from the German point of view. due to imputed costs such as depreciation or an opportunity cost for the managing owner (CHRISTENSEN and WAGENHOFER. is the virtually nonexistence of imputed costs in Anglo-Saxon management accounting as mentioned above (ZIRKLER. Because the capital market now plays an important role for Anglo-Saxon companies. 2002: 19). offers a window of . 1997: 255). external reporting to both shareholders and creditors can be regarded as very important for corporations. which calculate solely with actual costs (KÜPPER. 2002: 21. average allocations of manufacturing overhead. 2004: 16). MESSNER. The difference between costs and expenses is deemed very important in Germany. 2004: 17.financial accounting and management accounting . 1995: 24-5). The determination of imputed depreciation or imputed management salary. 2003: 262). Consequently. Profits computed in the financial accounting system differ from those in the cost accounting system.S. While the same data is used for external reporting as well as for internal decision support. 1998: 8).20 different systems .access a jointly-used data base (OEHLER. than. costs are computed “based on aggregate. for instance.
Management accounting instruments Management accounting instruments are among the key drivers of convergence in management accounting. Similar to imputed costs. Finally. If required. “the high cost of information collecting. In Germany. As a reason for the joint use of a common database. 2003: 264). many managers consider this information alone as insufficient for running a company (CHRISTENSEN and WAGENHOFER. Moreover.2. opportunity costs are uncommon in Anglo-American countries (HORNGREN ET AL.2. 1999: 8). these types of cost are calculated in special calculations for particular purposes. 2003: 397-8). Therefore. KAPLAN and ATKINSON (1998: 8) state that at the beginning of the last century. in contrast to Germany. the benefits of separating management and financial accounting data and hence having an autonomous data base for internal calculations is regarded as more important than the higher costs of keeping two sets of books. 2002: 22).21 opportunity for managers to justify a different level of profit to that presented in the external reports (MESSNER. 1997: 358. ZIRKLER. The disadvantages of additional costs for collecting and maintaining separated data bases are currently reduced by state-of-the-art software (KEYS and MERWE. In the search for best practice. 4. 2002: 22). a relatively high percentage of diverse special analysis can be found in the general ledger system (ZIRKLER. the benefits are seen as the ability to support managerial decisions without any additional calculations from data that is based initially on the strict rules for external reporting. Although the demand for financial information is taken into consideration in this system. a spin-off of accounts payable and accounts receivable from the main ledger into subsidiary ledgers is also typical for the general ledger system (OEHLER. KEYS and MERWE. processing. management accounting instruments . 1999: 8). and reporting […] led companies to attempt to manage their internal operations with the same information used to report to external constituencies”. 1997: 255.
Therefore. “Prozesskostenrechnung” (process cost accounting). In this respect. is applied more commonly and only considers costs external to the manufacturing department (FRIEDL ET AL.22 are easier to adopt than a new accounting system or a foreign culture. It can furthermore be assumed that management accountants are familiar with the most common instruments of management accounting. 1995: 291). FRANZ and KAJÜTER (2002: 57980) recently analysed the spread of ABC and found that only 47 % of large German firms used ABC.A. has attracted considerable attention in the Anglo-Saxon countries since the mid-1980s. . and specific management accounting techniques enjoy various degrees of popularity in different countries (SHERIDAN.. and comparatively weak in Germany.S. In this context. DAVIS and SWEETING (1991: 44-5) analysed the “use or planned use of cost management techniques” in the U. FRIEDL ET AL.K. 2005: 56). Comparing the application of ABC in Germany. the instruments and tools can be assumed to be largely similar. manufacturing enterprises. Grenzplankostenrechnung (flexible margin costing) can be deemed one of the most important cost accounting tools for German companies (FRIEDL AL. or the U.. 1996: 104. This concept focuses on contribution margins and variable costs. While Activity Based Costing (ABC). the U. and ranked ABC with an affirmation rate of 60% as important for U.K. ABC is less commonly applied in Germany (SCHERRER. The classical ABC in the Anglo-Saxon countries links the overhead allocation to the activities carried out to produce and sell a product. an alternative approach.K.. In Germany. for instance. it is evident that there are also different approaches to ABC. and only half of these companies (48%) applied it regularly. In Germany. ET 2005: 56). Contrary to the use of ABC... although German and Anglo-Saxon managers approach accounting from different directions.K. rather than on full costing (as in ABC) and hence supports short-term decisions such as whether to accept or reject an additional order. BHIMANI (1996: 103) observed that ABC seems to be particularly strong in the U. 2005: 60).
Therefore. Hierarchical level of management accountants within the corporation As analysed with respect to the definitions of management accounting. STOFFEL. In Germany. instruments like discounted cash flow. management accountants should operate at a relatively high organisational position within the corporation and should be integrated sufficiently into the operational. COATES ET AL. 4. UEBELE (1981) and AMSHOFF (1993) found 54% and 60% respectively of controllers to be positioned at the second hierarchical level within the corporation (UEBELE.3. Organisational integration of management accountants in the corporation 4. 1970: 2183. or as part of the board of directors (HABERLAND. 1995: 291). 1992: 82). however. management accountants deal with objectively fair and highly relevant data within the corporation. MACHARZINA 2003: 390).S. neutrality and authority of the controller is considered important.A. empirical studies conducted in the 1980s and 1990s were in line with the above-mentioned statements and showed a dominance of controlling at the second hierarchical level (SERFLING.1. 1993: 335). strategic and tactical planning of the corporation (MACHARZINA 2003. 1981: 31. payback or internal rate of return are applied to varying degrees. 390).23 While another instrument such as budgeting is regarded as more or less equally important for all management accountants (Sheridan. p. In the U. Additionally. AMSHOFF. Therefore. This could be maintained by positioning the accountant at least at the second hierarchical level. calls for a high hierarchical rank of management accountants can be found in the management accounting literature in all countries (HABERLAND. there are . Such demands for an influencial and responsible position within the company. as generally proposed in the literature can to some extent be supported by empirical data. as well as to the activities presented above. 1970: 2183. (1995: 132) found that management accounting instruments are used in terms of the financial goals and orientation of a company and may therefore differ in their appliance and use. securing the independence.3. 1995: 98).
S. U. the top level in German corporations is by nature broader than in Anglo-Saxon corporations. German Public Limited Corporations are characterised by a management board with at least three members. management accountants (50%) are currently assigned to the third hierarchical level in this study. comparing the levels of hierarchical integration. Consequently.S. STOFFEL examined the hierarchical integration of German. it seems that a second hierarchical level in the U. 39 % at the second. In Germany. . 26 % at the third and only 1 % at the fourth hierarchical level. before drawing any further conclusions from the findings of the above study differences between the structures of large companies in the three observed countries have to be taken into account.A.K. whereas only the CEO can generally be identified as representing the highest level of management. However. the law requires an organisational structure for public limited corporations which is fairly distinct from the Anglo-Saxon board system.S. According to his results as presented in Figure 4.S.S. could be assumed. no controller can be found at the first level. 1995: 103). 65 % at the second. are both ranked at a relatively similar level of influence and responsibility within the corporation. 8 % of German management accountants are classified at the first hierarchical level.24 hardly any recent empirical studies on the positioning of management accountants in the hierarchy (STOFFEL. can be regarded as somewhat “higher” in the organisation than an equivalent position in German corporations. By contrast. and French management accountants. Therefore. a generally lower positioning. 50 % at the third and 11% at the fourth level. [Include Figure 4 here] Because most U. corporations.S. in U. despite the differences between German and Anglo-Saxon companies identified above.A. or U. compared to their colleagues in Germany. In contrast to the one-tier system in the U. it is evident that management accountants in Germany and the U. Therefore..
controllership remains closely interwoven and connected with financial aspects. In contrast to the U. who reports to the CFO at the same hierarchical level as the treasurer (SIEGWART. Interrelations and connections to adjacent departments Analysing the organisational integration of management accountants in the hierarchy of the corporation. 1995: 140).A. In the U. 1995: 291). 2003: 18).S. the controller is often seen as a financial executive.2. the nomenclature can vary significantly. examining the name given to the department in which management accountants work. 2005: 518). entails firstly. An analysis of the situation in Germany reveals similar variations in the practical environment (KÜPPER. or in conformity with the Anglo-Saxon .A. STOFFEL. In the U. This term can then be interpreted as an indicator of both the activities and the interrelations within the company. according to which 54 % of German controlling departments have no organisational connection to financing. corporations (STOFFEL. 1995: 144). being an administrative department supporting the head office.. 1982: 99. whereas such a strict separation was evident in only 3 % of the U.. Controlling can therefore be found either at the same hierarchical level as the finance department. such as ‘Betriebswirtschaft/Controlling’ (STOFFEL.3. 25 % of the departments for management accountants are also called ‘Controller’s department’. controlling departments can normally be observed at the same hierarchical level as finance departments.25 4. the department in which management accountants are located is nearly always labelled ‘controlling department’ or something similar which includes the term “controlling”.S. As a common denominator. In German companies. this does not necessary include any interrelations between the departments (SHERIDAN.S. WILLSON ET AL.A.. This is supported by empirical findings. STOFFEL’s findings indicate that. by contrast. Moreover.S. 1995: 143.. whereas 42 % are labelled ‘Finance Department’ and 28 % ‘Accounting Department’.
4.3 people are employed in U. management accounting departments also normally operate with more employees in Anglophone countries (STOFFEL. However. 2004: 5). This is empirically supported by STOFFEL (1995). there is consensus among management accounting scholars that the former. 1995: 117). 29.3. WEBER. Variances and differences in the role of the accountants can be seen as an indicator of the degree to which management accounting itself is converging or diverging throughout the observed countries. 1998: 1.1. some differences between the three countries are identifiable. In this context. compared to 12. on average.26 model.7 employees in German controlling departments (STOFFEL.4. 4. Role of management accountants in Germany . 2005: 528). as the same level as the treasurer who reports to the accounting department (KÜPPER.3. familiar role of the controller as a pure “score keeper” is at least partly obsolete in all countries (KAPLAN and ATKINSON. 1995: 150). Size of management accounting departments Comparable to the field of activity which was identified to be broader in the Anglo-Saxon countries than in Germany.S. both the changes and the development of the role of management accountants are important and must be taken into consideration. Role of the controller in the observed countries The fields of activity. the topics discussed above give only a limited indication of the self-perception and the role that management accountants actually play within the organisation.4. In all three countries. management accounting departments. the instruments used to achieve goals and the organisational integration of management accounting may be similar or vary between countries. Observing the current status of management accountants and their role within corporations. 4. who found that.
1995: 79. Furthermore. is that management accounting is no longer seen as pure score-keeping. the mission statement of the ‘INTERNATIONALER CONTROLLER VEREIN’. This image is supported by German scholars. Management accounting in Germany can. who stress either the ‘coordinative’ function. conveys an image of the German management accountant who concentrates on the creation of transparency and visualisation of economic consequences. In his numerous comparative studies of the role of British and German management accountants. the management accountant has evolved from a pure score keeper of past performance into a central contact person who participates in the management process (MUSSNIG. be seen as a representational effort. In this context. in Germany. HORVÁTH. WEBER. 2003: 148-9.27 The relevant literature and practice concur that. AHRENS (1997: 583) also supports this image. therefore. controlling has “no official input into concrete action” and carries “no operational responsibility” (AHRENS. the role of the management accountant is characterized as that of a modern coordinator and moderator of plans and processes within the corporation. 1996: 15. 2004: 21). 2006). Referring to his findings. German management accountants consider it necessary for the controlling department to be distanced from operational action and merely analyse or investigate the economic consequences of the organisational effort. What all of these functions have in common. 1997: 564). focussing on the coordination of business activities through plans. in Germany. whereby in Germany. WEBER 2004: 30-1). the ‘provision of information’ function or the function of controlling as a ‘special aspect of leadership’ (STOFFEL. the management accountant should be able to support decision makers within the corporation by providing relevant information on a wide range of issues (INTERNATIONALER CONTROLLER VEREIN. By maintaining and creating the management accounting system. This represents an image of the German management accountant as an advisor and provider of relevant information who visualises the economic consequences rather than being involved in the decision-making process. rather than operational involvement in actual decision making. Through this rather bureaucratic .
namely that management accountants are much more future-oriented. management accountants in general. Therefore.” (AHRENS.K. for instance. than for instance. 1997: 562). British management accountants. advise and ensure. Rather than being too distanced from operational matters and just acting as ‘scorekeepers’. as something that “just has to be done sometimes” (AHRENS.” (ibid. this statement .28 perspective. and the U. the management accountant should help. planning and coordinating. 1997: 573) and hence did not share the same status as in Germany.K. “We are responsible for the planning process… and generate the planning calendar. their colleagues in Anglo-Saxon countries. Although it is open to debate whether the latter aspects of planning and coordination are representative for U. We are responsible that the planning systems are available.4.K. it can be stated that German controllers “first and foremost see the organisation through the plan. companies are management by the “real [internal] figures” as opposed to publicly reported ones.) In conformity with the above image of a supporter and advisor of decision makers within the corporation. 4. but we are not responsible for the contents of plans. Furthermore. 1997: 564). were seen in the U. […] so we carry not (operational) responsibility. that planning takes place (AHRENS. Contrary to the above findings. 1997: 584). 1997: 583). SHERIDAN argues that it is possible for accountants to look much more at the future than. the management accountants analysed by AHRENS regard themselves as more future-oriented than their colleagues in Germany (AHRENS. Role of management accountants in the U. British management accountants see their strengths in the involvement with proactive decision making and the formulation of strategic direction (AHRENS. which have been identified as key instruments of German management accountants (HORVÁTH. SHERIDAN (1995: 291) discusses another aspect of management accountants in Germany. In Germany.2. 2003: 165). the schedule of activities.S.
2004: 176). Management accountants are no longer mere scorekeepers of past performance and have become value-adding members of management teams (KAPLAN and ATKINSON. for all observed countries. 2004: 20-1). 2003: 9. Companies like SIEMENS. who is detached from operational matters. 2003: 5-6). Conclusion and future prospects 5.29 nonetheless supports the perception of the role of management accountants in the Anglophone literature. Nevertheless. This is based on the notion that the Anglo-Saxon management accountant is. in Germany (STOFFEL. 5. WILLSON ET AL. As opposed to previous observations. 1995: 120. responsible for supporting and coordinating the decision-making processes in upper management (GRANLUND and LUKKA. for instance. it can be stated that the management accountant has developed from the above mentioned pure cost accountant to “someone with broad management and interpersonal skills who can interact with other departments” (WILLSON ET AL. Due to the close organisational connection with finance and especially with the internal cost management department. 1998: 1). Several researchers agree with AHRENS and consider the modern Anglo-Saxon management accountant as being far more deeply involved in operational decision making than. the management accountant can now be described as a modern manager with at least as much management experience as accounting knowledge (WILLSON ET AL. this role of the management accountant as a pure consultant or provider of information. 2003: 7). WEBER. 1998: 164). cannot be supported (STOFFEL. 2004: 172). WEBER. BAYER . Current developments One current development seems to erode the strict separation in German financial accounting practice (JONES and LUTHER. 1995: 122).1. by definition. The increasing implementation of international accounting standards like IFRS or US-GAAP in Germanbased multinationals is sparking a debate on the use of external reporting data for management accounting calculations (WEBER. 2004: 14.
This approach of externally and internally reported figures becomes feasible due to the characteristics of the international accounting standards IFRS and US-GAAP. 2003: 773). 2002: 282. This development in German accounting is commonly referred to as Biltrolling1 (CHRISTENSEN and WAGENHOFER. The implementation of IFRS or US-GAAP provides reasons for firms to combine internal and external accounting figures within the corporation (KAHLE. Instead. Considering recent developments in management accounting practice. Furthermore. 2003: 392). these standards are less tax-driven and put less emphasis on valuation principles such as prudence (CHRISTENSEN and WAGENHOFER. which are derived from external figures. 1997: 255). little knowledge and experience has been transferred from Germany to the Anglo-Saxon countries. a system with a nearly identical basis for internal and external values allows for comparisons with the general ledger system in Anglo-Saxon countries. the abovementioned statement on the lack of relevance of financial accounting figures for internal management decisions seems to be unwarranted (CHRISTENSEN and WAGENHOFER. In the past.30 or DAIMLER-CHRYSLER have abandoned the isolated orientation on operating profits based on imputed internal data. A stronger orientation on the economic reality and measurement of managerial efficiency stresses the modification of international accounting standards for internal control needs. 2003: 774). Consequently. ZIRKLER. 1997: 255. MACHARZINA. 1997: 255) and are much more committed to delivering and procuring relevant information. Recent developments in both management accounting practice and in 1 Biltrolling is an amalgam of the two words “Bilanz” and “Controlling” and refers to a combination of cost-oriented controlling and financial management accounting. . KAHLE. a harmonisation of internal and external accounting can be observed in a growing number of German companies. these companies focus rather on operating profits for internal calculations. 1997: 255. Accordingly. They are “viewed as resulting in less biased numbers” (CHRISTENSEN and WAGENHOFER.
K.. Summary The present paper compared management accounting practices in Germany. This software is widely used in large companies worldwide and offers the conceptual framework of German flexible-margin costing. the monthly release of STRATEGIC FINANCE. 2006: 3). a satisfactory level of support of management with respect to making objective and fair decisions is not always ensured (HORVÁTH. the journal of the U. 5. 2006: 3).2. In comparison to the U. 2006: 3).A. HORVÁTH. A transfer of this knowledge is gaining increasing acceptance in management accounting practices in the Anglo-Saxon countries (FRIEDL ET AL. Therefore.S. and the U.S. either the general ledger concept or the two-circle system. and analysed the directions in which they are moving. 2006: 3).31 the literature signal a reversion of this knowledge transfer from German management accounting to Anglo-Saxon countries.. the U. the concept of German management accounting is discussed regularly in the Anglophone management accounting literature (HORVÁTH. The most significant difference between Anglo-Saxon and German management accounting is therefore the use of the respective management accounting system. Due to these varying approaches. the German SAP enterprise resource planning software can be regarded as an important driver of convergence and knowledge transfer from Germany to the Anglo-Saxon countries.A.S. Dealing with management accounting at an international level reveals a range of both differences and similarities. German . such as the lack of imputed costs in the Anglo-Saxon countries and different bases for calculating profits in Germany. As a solution.-Institute of Management Accountants (IMA). As described above Anglophone corporations are increasingly becoming aware that management accountants are excessively involved in operational matters.K. 2005: 56. In the past two years. further differences arise. or the U. Turning to practical developments. has published a series of papers dealing with German management accounting (HORVÁTH.
32 management accounting exerts a stronger influence on management. Furthermore. the quicker and broader is the convergence in the respective field of activity.S. differences in management accounting practices still exist and will presumably remain in the future. Therefore. the concept of Biltrolling indicates a harmonisation of internal and external accounting similar to the Anglo-Saxon model.K. which are to provide information.A. this is currently happening. As has already been stressed. While Anglo-Saxon management accounting is also directed at shareholders. They are independent of most distinguishing factors such as cultural and educational background. participate in the management process and ensure rational managerial decision making. Conversely. Further important differences were revealed in the deeper involvement in operational matters and the broader fields of activity of management accountants in the U.S. German cost management is commonly presented as best practice in recent U. and the U. German management accounting is addressed at internal target groups alone. This is the main driver behind the convergence of Anglo-Saxon and German management accounting. management accountants in all three countries apply reasonably similar objectives and goals. because financial accounting figures are deemed as not useful for internal decision making (JONES and LUTHER. despite these convergence tendencies. the more instruments that are applied and the more bestpractice instruments that are mutually exchanged between the countries´ management accountants. In discussing the fundamental need for a discipline like comparative management accounting. Regardless of the varied target groups. some similarities and commonalities could also be observed. management accounting literature. The instruments applied by management accountants are the catalyst for achieving this. it can be stated that. In Germany. German management accounting and Anglo-Saxon accounting are both recognising the advantages of each other’s techniques and practices. applications of the German based software SAP also lead to a knowledge transfer from Germany to the Anglophone countries. 2004: 13). Besides these differences. Due to .
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'main focus of the paper' 30 studies (4) 'search for Others similarities' 3 studies relevant’ relevant’ National management accounting (2) 'comparison with other countries' 7 studies (5) ’not Peripheral to management accounting (3) 'consider some aspects' 7 studies (6) ’not Countries Others 2 22% Disagree 2 22% Figure 1: Categorisation of management accounting literature German management accounting is more long-term oriented than U.Topic Comparative management accounting (1) Germany.S.K. U. management accounting Agree 5 56% Agree Disagree Others Figure 2: Comparison of long-term orientation of management accountants . and U.K. and / or U.S.
S Figure 3: Fields of activity for management accountants (Source: Adapted from STOFFEL. 1995: 157) Comparison of management accountants integration 70 60 50 40 Germany U.S. % 30 20 10 0 1 level of hierarchy 2 3 4 Figure 4: Comparison of management accounting integration (Source: STOFFEL. 1995: 141-2) .Fields of activities of management accountants Computer applications Internal auditing Insurance Accounts receivable Tax planning and administration External reporting Liquiditiy management Financial accounting Internal cost management Pre-investment analysis Internal reporting Strategic planning Operational planning Budgeting 0 20 40 60 80 100 % Germany U.
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