Line-item reporting, factor acquisition, and subcontracting

Article Abstract:

The usefulness of line-item reporting by managerial accountants is examined for both centralized and decentralized management situations. Line-item reporting disaggregates net cash flows, but whether such disaggregation is useful to corporate management seems questionable. The research uses a factor acquisition model and a subcontracting model to show that: (1) line-item reporting may not be helpful, even when net revenues are inadequate to account for revenues and costs individually; (2) line-item reporting is useful when spanning conditions have been satisfied in either centralized or decentralized organizations; (3) line-item reporting is also useful in centralized organizations when cost distributions are independent of the reporting agent, and (4) line-item reporting is useful when reported by subcontracting agents only if the renewal of the subcontract is sufficiently likely.

Methods, Management, Usage, Finance, Business budgets, Financial statements, Disclosure statements (Accounting), Controllership

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Hierarchical structure and responsibility accounting

Article Abstract:

A model is developed to determine if responsibility accounting follows a hierarchical pattern. The model consists of: principals who design incentive structures within the hierarchy; workers providing input; and supervisors who provide production environment information for managing workers' activities. Results indicate that even when workers' performance is not used to evaluate their boss, explicit and implicit communication by workers is used for evaluations, hence 'bottom up' budgeting may provide important controls on the boss.

Accounting and auditing, Organizational behavior, Responsibility

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Delegated expertise

Article Abstract:

The central issues involved in contracting with an expert are the best way to motivate the expert and the best way to use pertinent information, or expertise. The multiple facets of managerial activity and restricted communication are the main areas of concern. For the purpose of simplification, managerial activity is limited to the spheres of planning and implementation. A principal-agent model is presented with structural features which capture the facets of the managerial task and costly communication.

Models, Management research, Business consultants, Management consultants

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