Professional dominance: The relationship between financial accounting and managerial accounting, 1926-1986

Accounting Historians Journal, The, Dec 2002 by Richardson, Alan J

The prior literature used in this study [such as Abbott, 1988; Lukes, 1974; Freidson, 1970] served to direct the "theoretical sampling" undertaken; and to provide a starting point for investigation of the phenomenon. In this case the literature was used to identify the boundary between two professions as an important empirical site and possible power relations across jurisdictional boundaries as a research question [Strauss and Corbin, 1998]. Theoretical sampling is an iterative process in which the data are re-examined in light of the emerging conceptual structure until "theoretical saturation" is achieved. The results reported below interweave representative samples of text with the conceptual categories that emerged from that data. These results are related back to the literature as a way of illustrating the applicability of those concepts to this domain and to demonstrate how the results extend or refine the existing theory.

WAS MANAGEMENT ACCOUNTING PERCEIVED TO BE SUBORDINATE TO FINANCIAL ACCOUNTING?

The assertion that management accounting is "subordinate" to financial accounting implies that a relationship of power existed between the two groups.10 Following Lukes [1974], this relationship could be reflected by (1) management accountants behaving, against their wishes, in ways preferred by financial accountants, (2) the exclusion of management accounting concerns from consideration in the development of the profession, and/or (3) management accountants forming preferences based on the ideological control of the financial accounting profession. The data used in this paper provides insight into the first two views of power and indirectly into Lukes' [1974] third dimension of power relations.

There is consistent evidence that management accountants felt constrained in the development of their techniques and unable to implement their preferred procedures. The evidence presented below suggests that this relationship was perceived in the linkages between the techniques of financial and management accounting, in the organizational roles that the two groups filled and in the relationship between their professional societies. In each of these areas management accountants recognized and thereby reaffirmed the dominance of financial accountants.

With regard to the technical aspects of their craft, management accountants felt pressure to integrate cost accounts with the general ledger, to fully allocate costs and to use historical cost information during periods of inflation. Although these are necessary attributes of historic cost financial reports, these requirements were seen as limiting the usefulness of accounting information for internal decision-making. These concerns arose particularly regarding the use of standard and marginal costs during the 1920s and 1930s, and regarding the need to adjust accounting information for the effects of inflation during the late 1940s and early 1950s and again during the late 1960s and early 1970s [Leacy, 1999].

Smails, an influential educator at Queen's University during the first decades of the 20th century, was pointedly critical of the effects of integrating cost accounts into the general ledger. He attempted to demonstrate the relevance of marginal cost approaches that would ignore some costs in order to produce information relevant to decision-making: The contemporary literature gives the impression that costing procedures were prostituted to the requirements of financial accounting and that everyone was satisfied provided that the aggregate of unit costs calculated by the cost accountant equaled the total expenses recorded in the general ledger [Smails, 1939].