Comparative Management Accounting –
Literature Review on Similarities and Differences Between
Management Accounting in Germanic and Anglophone Countries

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
2
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,

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. 4
The paper is organized as follows. First, we explain the choice of the selected countries
and the methodology used. Section 3 then introduces the general concept of comparative
management accounting. Based on the terminological specification of nationally diverging
definitions of management accounting labels, the following section 4 describes and compares
the main aspects and characteristics of management accounting in Germany, the U.S.A. and
the U.K. Finally, section 5 summarizes the findings. 2. Methodology
The present study concentrates on Germany, the U.K. and the U.S.A. These countries
have been selected due to various reasons. For a start, the U.S.A. is the world’s leading
economic power and thus of fundamental significance with respect to management
accounting. Many countries have been and still are influenced by new developments in
American management accounting (SHERIDAN, 1995: p. 293). Therefore, the inclusion of the
U.S.A. is considered essential in this comparative study. To a lesser degree, this also applies
to the UK. Furthermore both, the U.S.A. and the U.K., continuously influence management
accounting developments in other countries, because English is the dominant language in the
world of business (PISTONI and ZONI, 2000: 311). In addition, it is often claimed that
management accounting has its roots in the U.S.A. and has influenced accounting practices
and developments in German management accounting (Otto, 2000: 25).

comparative management accounting in Latin America.
More recent empirical studies focussing explicitly on the comparative element of
management accounting can be found in AHRENS (1997; 1999), OTTO (2000), ZIRKLER
(2002), JONES and LUTHER (2004) and HOFFJAN and WÖMPENER (2006).
In order to obtain an overview of the relevant comparative management accounting
literature analysed in this paper, the studies were grouped into six different categories as
presented in Figure 1: 6
[Include Figure 1 here]

The categories are ordered with decreasing relevance to our selected countries and
comparative management accounting in general. Following this categorisation, all papers in
the first group cover the countries Germany, the U.S.A. and / or U.K. and deal simultaneously
with comparative management accounting. In the literature review, 30 papers could be
included in the first category. The second group includes papers that deal with national
management accounting from the respective countries. Although not dealing explicitly with
comparative management accounting, these papers are nevertheless useful for a deeper
analysis. Because they represent the characteristics and particularities of the specific
countries, these papers can be compared to one another.
In the third category, aspects closely related to management accounting are discussed
from the respective country perspective. Topics such as culture do not deal explicitly with
management accounting, but nevertheless have a direct or indirect influence on different
perceptions of accounting in the various countries.
In the fourth category, the comparative element is highlighted again, although these
papers do not deal explicitly with the countries that form the focus of this paper. This
category is included, due to potential cross-references from other countries. If it is possible to
observe how management accounting differs or converges between other countries,
meaningful comparisons could possibly be made.

indication of the terminological proximity of German controlling and Anglo-Saxon
management accounting (KÜPPER, 2005: 6).
Although there is not such a demand for theoretical definitions in the U.S.A. that are
comparable to those used in Germany (Otto, 2000: 25), the following chapter tries to examine
whether deeper differences are identifiable from an initial view of the definition and
terminology of both terms.
8
3.2.1. Management accounting terminology and definitions in the U.S. and the U.K.
In the Anglophone literature, it is evident that various terms are used for management
accounting. Labels like ‘internal accounting’, ‘enterprise reporting’ and ‘managerial
accounting’ are widely used as synonyms for management accounting (ZIRKLER, 2002: 17).
Given these different labels that are used for the same basic concept, AMAT ET AL. (1999: 19)
also observed that “the term management accounting implies different meanings across
national boundaries”. In general, two different perceptions of the scope of management
accounting can be observed in the relevant Anglo-Saxon literature (MUSSNIG, 1996: 13).
The first perspective defines management accounting from a narrow point of view, such
that the term refers mainly to internal cost accounting and internal calculations (MUSSNIG,
1996: 13; HORVÁTH, 2003: 79).
A second, much broader perspective is more common in the Anglo-Saxon countries.
According to the NATIONAL ASSOCIATION OF ACCOUNTANTS (1981: 4)

management
accounting is defined as:

“[…] the process of identification, measurement, accumulation, analysis, preparation,
interpretation, and communication of financial information used by management to plan,
evaluate, and control within an organization and to assure appropriate use of and

(SIEGWART, 1982: 98; STOFFEL, 1995: 10).
This difficulty concerning the job description of the controller is quite often referred to in
the Anglo-Saxon literature. ”The modern controller does not do any controlling in terms of
line authority except in his own department“ (HORNGREN ET AL. 2005: 13; STOFFEL, 1995:
10).
Finally, 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,
2000: 26).

3.2.2. Management accounting terminology and definitions in Germany 10
In contrast to the Anglophone label ‘management accounting’, business managers in
Germany generally use the term ‘controlling’ as a description of the field of activity of
management accountants (BIRKET, 1998: 487; AHRENS and CHAPMAN 2000: 482; KÜPPER,
2005: 3 4f). In this context, controlling describes the relatively young discipline of
‘Betriebswirtschaftslehre’ (business administration). Contrary to the purely practical approach
in the U.S.A. and U.K., the basics of controlling have been developed within the academic
literature (SCHERRER, 1996: 100; AHRENS and CHAPMAN 2000: 482; JONES and LUTHER 2004:
4; KÜPPER, 2005: 6) and its definitions and interpretations are characterized by its great
variety and diversity. A widely-accepted definition of controlling in the German literature has,
therefore, not been so far discernible until the present (FREIDANK, 1993: 400).
Nevertheless, it can be observed that the majority of definitions focus on the decision-
support function (BERENS ET AL., 1995: 144), the coordinative function (HORVÁTH, 2003:
148-9; KÜPPER, 2005: 5) or define controlling as safeguarding managerial rationality (WEBER,
2004: 47).
While controlling concentrates more on internal accounting matters, in the Anglo-Saxon
countries, management accounting includes internal as well as external accounting aspects
and can be seen as a general term for accounting as a whole (MUSSNIG, 1996: 13).

organisational commitment than their American colleagues, due to a lower tendency towards
individualism (CARR and TOMKINS, 1998: 218).
In the economic literature, special attention is also paid to the differences in financial
culture. While, on the one hand, it is commonly stated that the Anglo-Saxon world is more
shareholder and stock-market driven, on the other hand, many scholars do in fact refer to the
German financial culture as more stakeholder driven (SHERIDAN, 1995: 290).
Culture can therefore explain national differences in management accounting. However,
whenever culture is quoted as an influence-factor on management accounting, it is important
not to treat this complex field too simplistically (HARRISON and MCKINNON, 1999: 483). 12
Moreover, because this paper focuses on the characteristics and consequences of these
differences, rather than on their cultural causes, these studies are only considered peripherally.

3.3.2. Education, 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. While both in the U.K. and
U.S.A., management accounting is based on a professional environment (AHRENS and
CHAPMAN, 2000: 480; JONES and LUTHER, 2004: 4), management accounting in Germany can
be characterised more as a discipline taught at university than a fully-fledged profession
(SHERIDAN, 1995: 289; AHRENS and CHAPMAN, 2000: 482).
Furthermore, 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. Conversely, German management
accounting is highly educationally oriented (Jones and Luther 2004: 3) and there is no well-
established institutional environment. 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.S.A. and the U.K.,
or stress the minimal institutional background in Germany. Therefore, the analysed literature


4. Comparison of relevant management accounting concepts
4.1. Responsibilities and objectives of management accounting
4.1.1. Objectives and target groups of management accounting
In contrast to Germany, management accounting practices in Anglo-Saxon countries also
include, by definition, the provision of financial reports for non-management groups like
shareholders, creditors and tax authorities. Consequently, one could assume that both the
target groups and the objectives of management accounting differ between these countries. 14
According to the NATIONAL ASSOCIATION OF ACCOUNTING (1982: 24) in the U.S., the
objectives of management accounting include ‘providing of information’ and ‘participating in
the management process’. Analysing these objectives further, it becomes apparent that there
are many similarities to the German understanding of management accounting objectives. In
Germany, the aim of management accounting is commonly described as that of ensuring
rational managerial decision making as well as safeguarding the processes of controlling,
planning and governing (AMSHOFF, 1993: 216; MACHARZINA, 2003: 393; WEBER, 2004: 29-
30; KÜPPER, 2005: 11). Furthermore, it can be stated that all management accountants pursue
the company goal of profit maximisation as well as that of supporting the management.
Therefore, despite a broader field of management accounting target groups in Anglo-
Saxon countries compared to Germany, it can be argued that management accountants in the
observed countries share similar goals and objectives.

4.1.2. Long-term versus short-term goals
A widely-discussed question in comparative management accounting literature is whether
Anglo-Saxon countries like the U.S. or the U.K. are short-term oriented, whereas countries
like Germany and Japan are possibly more long-term oriented with respect to their business
decisions (SHERIDAN, 1995: 290; AHRENS, 1997: 557-8; CARR and TOMKINS, 1998: 217)
The dominance for managerial decision making of stock markets in London or New York

Furthermore, assuming a convergence of management accounting practices as observed
by the majority of scholars, a growing similarity of the instruments used for both long-term
and short term business-orientations is identifiable as well (COATES ET AL., 1995: 131).

4.1.3. Management accounting versus financial accounting
Creditor protection and the principle of prudence are historically strongly emphasised in
German accounting. Hence, stringent regulations concerning the reported content to outsiders 16
of the company can be observed in Germany (BAETGE ET AL., 2002: 112). Consequently,
financial accountants are driven by statutory requirements, particularly with respect to the
(German) legal and commercial codes and the tax regime (JONES and LUTHER, 2004: 13).
Their task is to emphasise legal requirements, rather than economic needs inside the
company. Financial accounting is directed formally at the state, and not primarily towards
shareholders, as in Anglophone countries.
Consequently, external reports from financial accounting are sometimes considered as
“not relevant to management decision making” in Germany (JONES and LUTHER, 2004: 13),
probably leading to a denial that financial accounting is a bone fide component of
management (ibid.).
Furthermore, Anglo-Saxon management accounting does not operate with imputed costs
such as opportunity costs for managing owners, as is common in German management
accounting (ZIRKLER, 2002: 23; MESSNER, 2003: 262). Anglophone accounting figures are
based on the same business values that are used in financial accounting. Due to imputed costs,
profits calculated in financial accounts normally differ from those calculated in the
management accounting system in Germany (BAETGE ET AL., 2002: 565-6). Managers in
Germany still emphasise that the numbers reported in the financial statements are not relevant
for internal decision-making purposes.
Because the data reported by financial accountants is based on the protection of
stakeholders and is not relevant for supporting managerial decisions, financial accounting is

management accountants, are presented in Figure 3.
[Include Figure 3 here]

With respect to these findings and in conformity with the studies mentioned above,
financial accounting plays a dominant role for U.S. management accountants, with 97% being
responsible for external accounting matters. Conversely, in Germany, financial accounting is
considered to be relevant for only 21% of management accountants (ZIENER, 1985: 23-4). 18
This is the most significant difference that can be identified between German and Anglo-
Saxon management accounting activities.
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, for which 66% of U.S. management accountants are responsible, compared to 9%
in Germany.
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, which is uniformly regarded as being rather less relevant for daily work. However,
despite this low circulation of internal auditing, the comparison reveals that it is still more
frequently integrated into Anglo-Saxon management accounting than into German
management accounting (ZIENER 1985, p. 23-4). In Germany, internal auditing can be
described as operating closely together with the German controller, but not necessary as being
integrated into the controlling department itself (HORVÁTH, 2003: 811; STOFFEL, 1995: 93).
By contrast, internal auditing is regarded as a potential activity for management accountants
in the U.S.A. (HABERLAND, 1970: 2182).
Further differences with German und U.S. management accounting can be found in the
appropriate insurance of the corporation’s assets or the responsibility for computer services
(HABERLAND, 1970: 2184; STOFFEL, 1995: 113-14; WILLSON ET AL., 2003: 4). Normally,
neither of these two fields of activity is assigned to German controlling (STOFFEL, 1995: 93).

circle or dual cost system is still the most commonly used in Germany. Financial and cost
systems are run independently in Germany, “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, 1998: 8). In the following discussion, both the
characteristics, consequences and differences that arise due to this variation will be discussed.
The general ledger system can be described as an integrated system that includes all
accounts in the financial statements. The key characteristic of this system is that the two 20
different systems - financial accounting and management accounting - access a jointly-used
data base (OEHLER, 1997: 358; ZIRKLER, 2002: 19). While the same data is used for external
reporting as well as for internal decision support, both financial accounting and management
accounting therefore calculate with the same values and basics. Consequently, costs are
computed “based on aggregate, average allocations of manufacturing overhead, and control
procedures use monthly variances computed from general ledger financial accounts” (KAPLAN
and ATKINSON, 1998: 8).
Because the capital market now plays an important role for Anglo-Saxon companies,
external reporting to both shareholders and creditors can be regarded as very important for
corporations. Significantly more management accounting information is used for external
reporting in the U.S.A. than, for instance, in Germany (ZIRKLER, 2002: 16). Consequently, it
can be assumed that the general ledger system is dominated by financial accounting data
(ZIRKLER, 2002: 21).
A further significant difference from the German point of view, is the virtually non-
existence of imputed costs in Anglo-Saxon management accounting as mentioned above
(ZIRKLER, 2002: 21; MESSNER, 2003: 262). While imputed depreciation and interest are of
great importance in German management accounting (SCHERRER, 1996: 105), they rarely
appear in Anglophone management accounting theory and practice (ZIRKLER, 2002: 21;
JONES and LUTHER, 2004: 17; WEBER, 2004: 16).
The difference between costs and expenses is deemed very important in Germany. Profits

support managerial decisions without any additional calculations from data that is based
initially on the strict rules for external reporting. The disadvantages of additional costs for
collecting and maintaining separated data bases are currently reduced by state-of-the-art
software (KEYS and MERWE, 1999: 8).

4.2.2. Management accounting instruments
Management accounting instruments are among the key drivers of convergence in
management accounting. In the search for best practice, management accounting instruments 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. Therefore, although German and Anglo-Saxon managers approach
accounting from different directions, the instruments and tools can be assumed to be largely
similar, and specific management accounting techniques enjoy various degrees of popularity
in different countries (SHERIDAN, 1995: 291).
While Activity Based Costing (ABC), for instance, has attracted considerable attention in
the Anglo-Saxon countries since the mid-1980s, ABC is less commonly applied in Germany
(SCHERRER, 1996: 104; FRIEDL ET AL., 2005: 56). Comparing the application of ABC in
Germany, the U.K., or the U.S.A., it is evident that there are also different approaches to
ABC.
The classical ABC in the Anglo-Saxon countries links the overhead allocation to the
activities carried out to produce and sell a product. In Germany, an alternative approach,
“Prozesskostenrechnung” (process cost accounting), is applied more commonly and only
considers costs external to the manufacturing department (FRIEDL ET AL., 2005: 60). In this
respect, DAVIS and SWEETING (1991: 44-5) analysed the “use or planned use of cost
management techniques” in the U.K. and ranked ABC with an affirmation rate of 60% as
important for U.K. manufacturing enterprises. In Germany, FRANZ and KAJÜTER (2002: 579-
80) recently analysed the spread of ABC and found that only 47 % of large German firms

securing the independence, neutrality and authority of the controller is considered important.
This could be maintained by positioning the accountant at least at the second hierarchical
level, or as part of the board of directors (HABERLAND, 1970: 2183; STOFFEL, 1995: 98). 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.
In Germany, 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, 1992: 82). UEBELE (1981) and AMSHOFF (1993) found 54% and
60% respectively of controllers to be positioned at the second hierarchical level within the
corporation (U
EBELE, 1981: 31; AMSHOFF, 1993: 335). In the U.S.A. however, there are 24
hardly any recent empirical studies on the positioning of management accountants in the
hierarchy (STOFFEL, 1995: 103).
STOFFEL examined the hierarchical integration of German, U.S. and French management
accountants. According to his results as presented in Figure 4, 8 % of German management
accountants are classified at the first hierarchical level, 65 % at the second, 26 % at the third
and only 1 % at the fourth hierarchical level. By contrast, in U.S. corporations, no controller
can be found at the first level, 39 % at the second, 50 % at the third and 11% at the fourth
level.
[Include Figure 4 here]

Because most U.S. management accountants (50%) are currently assigned to the third
hierarchical level in this study, a generally lower positioning, compared to their colleagues in
Germany, could be assumed. However, 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.
In Germany, the law requires an organisational structure for public limited corporations

An analysis of the situation in Germany reveals similar variations in the practical
environment (KÜPPER, 2005: 518). As a common denominator, controlling departments can
normally be observed at the same hierarchical level as finance departments. In contrast to the
U.S.A., this does not necessary include any interrelations between the departments
(SHERIDAN, 1995: 291).
This is supported by empirical findings, according to which 54 % of German controlling
departments have no organisational connection to financing, whereas such a strict separation
was evident in only 3 % of the U.S. corporations (STOFFEL, 1995: 144). Controlling can
therefore be found either at the same hierarchical level as the finance department, being an
administrative department supporting the head office, or in conformity with the Anglo-Saxon