PERFORMANCE MEASUREMENT AND FORMAL CAPITAL EXPENDITURE CONTROLS IN DIVISIONALISED COMPANIES

PERFORMANCE MEASUREMENT AND FORMAL CAPITAL EXPENDITURE CONTROLS IN DIVISIONALISED COMPANIES arisen in the UK literature, does not appear to have had a substantial impact in the US literature, although one of the protagonists (Amey) currently teaches in North America. It is interesting to note that despite its recommendation in basic management accounting texts there does not seem to be any widespread use of residual income in US industry, In a study in the mid-l960’s, Mauriel and Anthony (1966) found that 27% of their sample used residual income as one of the measures of divisional performance. More recently, Reece and Cool (1978) reported that the percentage of their sample of US companies using residual income was only 34%. These figures suggest that the preference for residual income shown by educators has not had a material effect on practices in US industry. The position in the UK is somewhat similar. Tomkins (1973) found rather limited use of residual income in divisionalised UK companies. This limited use of residual income in practice might be attributed to the absence of responsibility for capital investment decisions at the divisional level. AU decisions concerning capital expenditure might be made at corporate headquarters. Amey had expressed the view that “in the interest of achieving the http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Business Finance & Accounting Wiley

PERFORMANCE MEASUREMENT AND FORMAL CAPITAL EXPENDITURE CONTROLS IN DIVISIONALISED COMPANIES

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Publisher
Wiley
Copyright
Copyright © 1981 Wiley Subscription Services, Inc., A Wiley Company
ISSN
0306-686X
eISSN
1468-5957
D.O.I.
10.1111/j.1468-5957.1981.tb00824.x
Publisher site
See Article on Publisher Site

Abstract

arisen in the UK literature, does not appear to have had a substantial impact in the US literature, although one of the protagonists (Amey) currently teaches in North America. It is interesting to note that despite its recommendation in basic management accounting texts there does not seem to be any widespread use of residual income in US industry, In a study in the mid-l960’s, Mauriel and Anthony (1966) found that 27% of their sample used residual income as one of the measures of divisional performance. More recently, Reece and Cool (1978) reported that the percentage of their sample of US companies using residual income was only 34%. These figures suggest that the preference for residual income shown by educators has not had a material effect on practices in US industry. The position in the UK is somewhat similar. Tomkins (1973) found rather limited use of residual income in divisionalised UK companies. This limited use of residual income in practice might be attributed to the absence of responsibility for capital investment decisions at the divisional level. AU decisions concerning capital expenditure might be made at corporate headquarters. Amey had expressed the view that “in the interest of achieving the

Journal

Journal of Business Finance & AccountingWiley

Published: Sep 1, 1981

References

  • The Usefulness of Residual Income
    Emmanuel, Emmanuel; Otley, Otley
  • The Residual Income Debate
    Mepham, Mepham
  • Profit Measurement in Divisionalised Companies
    Scapens, Scapens
  • Another Look at Residual Income

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