Explaining implementation difficulties associated with activity-based costing through system uses

Abstract

Purpose

The purpose of this paper is to explore how and why the uses (enabling or controlling) of an activity-based costing system could cause difficulties in implementing such a cost system.

Design/methodology/approach

The authors conducted a case study in a French insurance company. Three successive research periods were undertaken: from March to August 2005, between October 2008 and June 2009, and in 2012. In total, 51 interviews were conducted during these periods. Other useful information was also collected through conversations, observation, and through the consultation of internal documents.

Findings

The results show that designing a cost system aimed at being simultaneously used in controlling and enabling ways can generate important difficulties. Furthermore, the results show that attempting to get around these difficulties could result in investing significant amounts of resources with no guarantee of success.

Research limitations/implications

Beyond the difficulties of extending the scope of application of case studies, the study was conducted in an organization involved in the insurance industry which could further limit its general applicability.

Practical implications

Based on the experience at Rassura, the authors argue that managers should be aware that designing and implementing a cost system that can simultaneously be used in both controlling and enabling ways is a very difficult, if not an insurmountable challenge.

Originality/value

The results highlight that one important characteristic of a cost system, how it is used, could explain, at least partially, implementation difficulties related to technical challenges, resistance to change and lack of resources.

Citation

Allain, E. and Laurin, C. (2018), "Explaining implementation difficulties associated with activity-based costing through system uses", Journal of Applied Accounting Research, Vol. 19 No. 1, pp. 181-198. https://doi.org/10.1108/JAAR-11-2014-0120