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MANAGEMENT ACCOUNTING IN RUSSIAN MID-SIZED COMPANIES: RESULTS

OF AN EXTENDED SURVEY-BASED STUDY

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18th International Scientific Conference Globalization and Its Socio-Economic Consequences
University of Zilina, Faculty of Operation and Economics of Transport and Communications, Department of
Economics 10th – 11th October 2018

MANAGEMENT ACCOUNTING IN RUSSIAN

MID-SIZED COMPANIES: RESULTS OF AN
EXTENDED SURVEY-BASED STUDY
Pavel Lebedev1,a,*
1
IEDC Bled School of Management, Presernova cesta 33, Bled 4260, Slovenia
a
p.lebedev@inbox.ru
*Corresponding author

Abstract. The recently adopted set of Global Management Accounting Principles presented a
global framework for management accounting—including core principles, reference to main
areas of practice, and a competence model. This study provides insight into the current state of
management accounting practices in mid-sized private Russian companies in comparison to
the global framework. The survey-based study was conducted during a two-year-long project.
756 representatives of financial and economic departments from 231 companies and
organizations were surveyed. It is often suggested that management accounting in Russian
companies serves the role of an internal adviser. As the results of the research conducted
show, this is a rather idealistic position reflecting wishful thinking. The results of the research
demonstrate that from the point of view of practices prevailing in companies today, the
current understanding of management accounting in Russian mid-sized companies is currently
corresponding to the level at which management accounting in the countries with developed
market economies had been twenty to thirty years ago. As illustrated by the results of the
research, the current understanding of management accounting, and management accounting
and controlling practices in the companies studied, both have a strong operational focus with
an almost invisible strategic agenda and an insignificant contribution to the value creation and
stewardship.

Keywords: management accounting, controlling, mid-sized companies, emerging markets,

Russia.

JEL Classification: L20, M41, M49, O52

1. Introduction
The last decades were marked by a rethinking of the role of management accounting and
controlling both at the levels of its “philosophy” and understanding by the professional
community as well as a re-evaluation of corporate practices (Horváth et al., 2015; Johnson &
Kaplan, 1987; Kaplan, 1984; Langfield-Smith et al., 2017). At an international level and as a
result of the collaboration of two global professional bodies – the American Institute of CPAs
(AICPA) and the Chartered Institute of Management Accountants (CIMA) – the Global
Management Accounting Principles were created in 2014 to guide best practice. Intended to
be universally applicable, the four core principles were formulated; and guidance was
provided as to how those principles could be applied across 14 key activities of the
management accounting function along with guidance about the core competencies required
of management accounting professionals to help organizations create, execute, and refine their

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18th International Scientific Conference Globalization and Its Socio-Economic Consequences
University of Zilina, Faculty of Operation and Economics of Transport and Communications, Department of
Economics 10th – 11th October 2018

strategies (The Chartered Institute of Management Accountants, 2014). Although businesses

around the world are increasingly adopting similar management accounting practices (Shields,
1998), development of management accounting in various countries follows its own path and
pace, being determined by national peculiarities of a socio-cultural, historical, legal, political,
and economic nature, which requires more systematic evidence (Luther & Longden, 2001;
Shields et al., 1991). In Russia, management accounting is still an emerging concept; and only
recently has conversation within the profession become more inclusive of global topics
(Lebedev, 2014). An existing combination of similarity trends and (existing) de-facto diversity
opens up plenty of research directions (Chenhall & Langfield-Smith, 1998). One of them is an
in-depth examination of what constitutes a national concept of management accounting and
accounting practices and an evaluation of how different they still are from “global”
approaches and what is in common between them. Comparative evidence on management
accounting practices between and within nations could be helpful in creating a well-informed
understanding of the development and prospects of the domain of management accounting in
a global and interconnected world (Bhimani, 2006).
This study aims to provide a deeper insight into current understandings of management
accounting within a country-specific context, answering the question: “What is the current
state of management accounting practices in midsized private Russian companies?”
comparing the current situation to the best practices suggested by The Global Management
Accounting Principles.
Management accounting helps organizations make better decisions by extracting value
from information—a process which is guided by the Global Management Accounting
Principles. They describe the fundamental values, qualities, norms, and features to which
management accounting professionals should aspire. They are comprised of the following four
principles:
Communication provides insight that is influential (P1);
Information is relevant (P2);
Impact on value is analyzed (P3);
Stewardship builds trust (P4). (The Chartered Institute of Management Accountants,
2014).
The principles should be consistently applied to the following 14 main practice areas of the
management accounting function: cost transformation and management; external reporting;
financial strategy; internal control; investment appraisal; management and budgetary control;
price, discount, and product decisions; project management; regulatory adherence and
compliance; resource management; risk management; strategic tax management; treasury and
cash management; and internal audit (The Chartered Institute of Management Accountants,
2014).

2. Method
The survey-based study was conducted during 2015-2016 as a joint project in a cooperation
with the Center for Financial Management and Education of the National Guild of
Professional Consultants of Russia, where I serve as a Director of the Center. A professional
body, association, or similar reputable organization in good standing is recommended to be
employed as a project sponsor in the case of survey studies in developing economies

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18th International Scientific Conference Globalization and Its Socio-Economic Consequences
University of Zilina, Faculty of Operation and Economics of Transport and Communications, Department of
Economics 10th – 11th October 2018

(Lebedev, 2015)—to ensure credibility, status, and response rate. The National Guild of
Professional Consultants of Russia is a professional body for management consultants, which
– for almost two decades – has contributed to the development of advisory, education, and
consultancy initiatives in Russia. During a period of 2 years, participants in seminars (of both
open and corporate programs) in the field of management accounting, controlling, and
financial management were surveyed. In total, 756 representatives of financial and
management accounting departments from 231 companies were surveyed. 522 questionnaires
representing 167 companies were found to be valid for processing.
The project followed a five-stage framework (Brownell, 1995; Lebedev, 2015; Smith,
2003) adapted for survey-based studies conducted in the context of emerging markets to
provide a basis for the research project management, planning, and successful
implementation. The five-stage framework suggests main steps to be undertaken in the course
of survey-based research as well as a checklist of questions to be addressed while planning
and executing each of the stages. Research was initiated in 2014. The early stage was focused
mainly on consultations with members of the professional community during practice
conferences, seminars, and consulting projects. A preliminary questionnaire structure was then
developed which was later refined in light of the Global Management Accounting Principles
as it presented the latest global best-practice framework of the profession. The final structure
of the questionnaire is disclosed in Table 1.
Table 1: Structure of the questionnaire
Questionnaire section Research question / Focus area
1. General information General information about the company
2. The essence of management What is the current understanding of the terms “management
accounting accounting” and “management accounting practices”? How is it
consistent with The Global Management Accounting Principles?
3. Management accounting practices What is the current state of management accounting practices in
in use by companies midsized private Russian companies? How is it compared to The Global
Management Accounting Principles?
4. Contribution of management How do the management accounting practices in use contribute to the
accounting practices to the overall success of the companies? Are management accounting practices
company’s performance consistent with the principles declared by The Global Management
Accounting Principles? Do they support each other?
5. Selection of management What factors influence the selection of management accounting
accounting practices in companies practices?
Source: Author’s work
This report focuses solely on the results obtained from Sections 3 and 4 of the
questionnaire. It illuminates how each principle of management accounting is applied in each
practice area of management accounting, thus providing an insight on a) the state and intensity
of management accounting practices and b) the extent to which management accounting
principles are applied across practices.
Only duly-filled-out questionnaires, reflecting the opinions of representatives of medium-
sized companies, were processed. As the main criterion for classifying the company as a
medium-sized business, its revenue was used. Companies with revenues of 1 to 10 billion
rubles were included. This corresponds to the classification which leading Russian banks use
to classify companies. For statutory purposes, Russian legislation suggests that medium-sized
enterprises are enterprises with revenues of up to 2 billion rubles (approximately 31 million

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18th International Scientific Conference Globalization and Its Socio-Economic Consequences
University of Zilina, Faculty of Operation and Economics of Transport and Communications, Department of
Economics 10th – 11th October 2018

euros)15. This approach correlates with an approach used by major banks in classifying their
clients.
For example, Sberbank, a leading Russian bank, accounting for one third of the Russian
banking system and managing 28.6% of aggregate banking assets as of August 1, 2015,
provides services to over 137 million retail clients and over 1.1 million corporate clients in 22
countries in which it is present (Sberbank, 2017). Ever since 2015, to qualify as being a “large
business,” a client must satisfy the criterion of having an annual revenue within a range of 1 to
10 billion rubles (15 to 156 million euros) (Sberbank, 2016). Similar criterion for a client to
qualify as a midsized company is applied by another leading Russian bank, VTB, which holds
a market share of corporate loan portfolios amounting to 16%; while its share of funds raised
from corporate clients amounts to 23%. VTB considers businesses to be midsized when their
revenues are within a range of 1 to 10 billion rubles (15 to 156 million euros) (VTB, 2016).
To address the research questions, the following approach to the operationalization of
management accounting principles was taken. 14 sub-sections of the questionnaire were
developed, corresponding to each of the practice areas of management accounting. The
definition of each practice area was adopted from the Global Management Accounting
Principles to reconcile respondents ’ understanding of what each practice area consists of.
Each subsection was divided into 4 parts, corresponding to each of the four management
accounting principles. In each part, statements of best practice as to how the principles could
guide the practice were suggested.
A Likert scale, ranging from 0 to 5 (with 0 being included), was offered to respondents for
them to evaluate the extent to which certain practices were being applied in their companies.
Responses could range from 0 (“The practice is non-existent in our company”) to 5 (“The
practice is fully implemented in our company”). In Table 2, an extract from the questionnaire
is presented, providing an example of an application of the principle of “Communication
provides insight that is influential” to the practice area “Cost transformation and
management.”
Table 2: An extract from the questionnaire
1. Cost transformation and management
The exercise of cutting waste while preserving or enhancing value generation. It involves the sustained
identification and reduction of waste across the organization while freeing up resource[s] to invest in customer[-
]focused innovation that will drive future value for stakeholders[.]
1.1. Communication provides insight that is influential
Cost targets are discussed and developed in conjunction with colleagues 0 1 2 3 4 5
and business partnerships to gain buy-in. They are refined over time
Plans for the execution of approaches are agreed upon with relevant 0 1 2 3 4 5
employees and business partnerships
Cost plans are broken down into components appropriate to the various 0 1 2 3 4 5
stakeholders
Reports are produced on how well cost management approaches are 0 1 2 3 4 5
rolled out across the organization
The drivers of costs are analyzed and discussed with relevant employees 0 1 2 3 4 5
and business partnerships so that those drivers can be effectively
managed in future
Source: Adapted from The Chartered Institute of Management Accountants, 2014

15
At an official rate of the Russian Central Bank as of 01.01.2017, at which time 1 EUR = 63,8111 RUR.

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18th International Scientific Conference Globalization and Its Socio-Economic Consequences
University of Zilina, Faculty of Operation and Economics of Transport and Communications, Department of
Economics 10th – 11th October 2018

Seminar participants who qualified for participation were asked to fill out the
questionnaire. Several incentives or other supportive measures were introduced to ensure
participation. Depending on the context and circumstances, participation included one or
several of the following: a prize-draw among participants, a discount of 10% for the next
seminar or event, and/or distribution of certificates of completion conditional on the return of
filled-in questionnaires. The questionnaires were distributed at the end of each educational
event, and enough time was provided for participants to complete the survey. In some cases,
the survey was offered online as a follow-up communication within three days following the
completion of the educational event.
The possibility of completing the questionnaire online, however, was offered to all
participants; some of them, who were not able to complete it right after the educational event,
preferred this option. In total, over the course of 2 years, 756 questionnaires (representing 231
companies) were collected. Of these, 522 questionnaires (representing 167 companies) were
considered valid for analysis.
The following approach was used for data analysis:
Firstly, at the level of the individual questionnaire, average scores were calculated for
each management accounting principle within each area of practice (as a sum of all
scores for each practice statement under each area of practice, divided by the number
of these practice statements);
Secondly, average scores were calculated for each management accounting principle
within each area of practice for all valid questionnaires based on data obtained at Step
a);
Thirdly, integrated scores were calculated for each area of practice and for each
principle of management accounting as a sum of scores obtained at Step b). For each
respective area of practice, this indicates the state and intensity of management
accounting practices. For each respective management accounting principle, it
indicates the extent to which management accounting principles are applied across
practices.
Finally, the results obtained in Step c) were compared to the maximal score
corresponding to the “best-practice case.” This equals a score of 70 for each
management accounting principle. (Each principle can potentially be applied to each of
14 management accounting practices with a maximal score of 5.) Likewise, it equals a
score of 20 for each management accounting practice area. (Four management
accounting principles can potentially enforce each management accounting practice
with a maximal score of 5.)

3. Results
In Table 3, a summary of the results of the study is presented.
Table 3: Study results quantified
Management accounting Management accounting principles16 Integrated Max. score
practice areas P1 P2 P3 P4 score (“best
practice”)

16
For the legend, please refer to Section 1.2.

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18th International Scientific Conference Globalization and Its Socio-Economic Consequences
University of Zilina, Faculty of Operation and Economics of Transport and Communications, Department of
Economics 10th – 11th October 2018

1. Cost transformation and

management 4 5 2 3 14 20
2. External reporting 0 3 1 1 5 20
3. Financial strategy 1 1 1 0 3 20
4. Internal control 0 0 0 0 0 20
5. Investment appraisal 1 0 1 1 3 20
6. Management and budgetary
control 4 1 0 2 7 20
7. Price, discount, and product
decisions 2 2 0 0 4 20
8. Project management 1 1 1 0 3 20
9. Regulatory adherence and
compliance 4 4 1 3 12 20
10. Resource management 2 2 0 2 6 20
11. Risk management 0 0 0 0 0 20
12. Strategic tax management 1 1 1 1 4 20
13. Treasury and cash
management 2 2 0 0 4 20
14. Internal audit 0 0 0 0 0 20
Integrated score 22 22 8 13 65 X
Max. score (“best -practice”) 70 70 70 70 X 280
Source: Author’s work

3. Discussion
The results of the research demonstrate that from the point of view of practices prevailing
in companies today, the current understanding of management accounting in Russian mid-
sized companies is currently corresponding to the level at which management accounting in
the countries with developed market economies had been twenty to thirty years ago. The key
focus of management accounting is aimed at information support (22 points) and transfer of
information to users (“communications” also received 22 points). It should be noted that the
maximum possible score could be 70 points, which would mean a profound and balanced use
of all management accounting practices under consideration. Creation of value and protection
of assets (in order to ensure sustainable operation of the company) received, respectively, only
8 and 13 points out of 70 possible, which indicates that these topics are not yet significant in
the corporate agenda. The integrated assessment of all 4 principles of management accounting
was only 65 points, whereas the maximum value corresponding to best management practices
could be 280 points. Accordingly, 65 points also included an integrated assessment of all areas
of practice, with an analogue of a maximum value of 280 points. Altogether. it indicates that
management accounting (in general) is ascribed relatively low importance.
The two most intensively used areas of practice were the following: cost management (14
points out of 20 possible) and management compliance with regulatory requirements (12
points out of 20). The first clearly demonstrates the common desire of many companies to
search for a “magic pill” and easy ways to achieve their goals . Meanwhile, the second is due
to historical features and the high role of regulation of economic activity—which forces
companies to pay close attention to compliance with various requirements, norms, and
regulations.

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18th International Scientific Conference Globalization and Its Socio-Economic Consequences
University of Zilina, Faculty of Operation and Economics of Transport and Communications, Department of
Economics 10th – 11th October 2018

Areas of practice such as managerial and budgetary control lag far behind (7 points out of
20), as does efficient management of resource usage (6 points out of 20). This is a rather
unexpected result, as it could be assumed that – given the traditionally large number of
mentions in business and academic literature, at conferences, and on the agendas of the
consulting and professional communities – these areas of practice might have receive more
points. Our explanation is that it is due to the fact that it was quite difficult for respondents to
relate these areas of practice to certain principles of management accounting. This clearly
illustrates the lack of strategic focus and fragmented management accounting practices of
mid-market Russian companies.
The thesis formulated above is also confirmed by the fact that the areas of practice which
(one way or another) are related to the company's strategy – financial strategy, investment
analysis, and strategic tax management – received a total of only 3–4 points. Particular
attention is called to such areas as internal control, risk management, and internal audit, which
did not score points at all.

4. Conclusion
It is often suggested that management accounting in Russian companies serves the role of
an internal adviser. As the results of the research conducted show, this is a rather idealistic
position reflecting wishful thinking. The desired goal, in this case, is formulated and
articulated in the relatively artificial environment of the academic and consulting community,
as well as in the rare public relations attempts of individual companies to present to the
general public the results of their implementing certain “best-practice” instruments.
Russian companies still have a long way to go in developing management accounting and
controlling systems up to a level consistent with good management practices. Success will
depend first of all on the understanding and acceptance – by all participants of this process –
of best practices and management principles for the purpose of generating long-term value
creation. Beyond this greater context and aim, individual instruments or even functional
principles – be they management accounting principles or marketing activity principles – do
not make much sense.

Acknowledgment

This paper is an output of a science project conducted jointly with the Center for Financial
Management and Education of the National Guild of Professional Consultants of Russia.

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18th International Scientific Conference Globalization and Its Socio-Economic Consequences

University of Zilina, Faculty of Operation and Economics of Transport and Communications, Department of
Economics 10th – 11th October 2018

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