MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY o0o - BARRIERS TO APPLY ACTIVITY – BASED COSTING METHOD (ABC) IN VIETNAMESE ENTERPRISES Specialty: Accounting - Auditing Code: 62 34 03 01 SUMMARY OF DOCTORAL DISSERTATION IN ECONOMICS HO CHI MINH CITY, 2016 The thesis is completed at HCMC University of Economics Science Instructors: Associate professor, Ph.D Nguyen Xuan Hung Ph.D Nguyen Ngoc Dung Reviewer Reviewer Reviewer The thesis will be defended at the council of the thesis assessment of At The thesis can be further referred at the library: PREFACE Rationale According to the report of conference between the Prime Minister and enterprises on October 21st 2014, on the affect of global recession on the loss and bankruptcy of companies The report shows the objective causes of the global economy, and the weak ability of Vietnam enterprises to respond to changes The report supposes that it is necessary to add knowledge about cost control for managers Activity Based Costing -ABC is a preeminent method which helps enterprises increase operational efficiency and competitiveness Study of factors preventing this method application is considered necessary and appropriate under the real condition of Vietnam However, ABC application in practice is very challenging To find out the factors preventing ABC application in practice and then give solutions is necessary aim of this thesis Research aims and questions The thesis aims at: - Defining factors effecting negatively on ABC application at Vietnam’s enterprises Assessing impacts of factors on ABC application at Vietnam’s enterprises - To solve the first aim, research question is given as: Which factors restrict ABC application at Vietnam’s enterprises? To solve the second aim, research question is given as: How negatively these factors impact on ABC application at Vietnam’s enterprises? Research object and scope Object of the thesis is the factors impacting on ABC application and the level of impact Scope of the thesis is Vietnam’s enterprises operating on center-point provinces such as Ho Chi Minh City, Ha Noi, Da Nang, Binh Duong, Dong Nai, Tay Ninh, etc The thesis surveyed from January to October of 2015 Research method and contribution To achieve the given aims, this thesis uses mixed method including qualitative survey and quantitative survey In the first period, qualitative survey is used to find out factors preventing ABC application in Vietnam’s enterprises In the second period, quantitative survey is used to calibrate the scale of regression model and assess the impact of each factor in this model to enterprises The thesis has the following discoveries and contributions in theory and practice: The thesis proves that there are nine factors impacting negatively on ABC application in Vietnam’s enterprises In addition to contribution to theory, this thesis suggests some ideas to apply the method successfully in practice, and enhance the management efficiency distinctly Thesis structure Introduction Present the difficulty of Vietnam’s enterprises, the urgent requirement of ABC application to increase competitiveness of the enterprises Build the research aims and determine research questions to be the direction of the whole thesis Chapter Overview of research prevents the overview of the previous researches related to global and Vietnamese theses Chapter Literature Review present literature review as the basis of research theories include: history of cost accounting system, history of ABC method, factors restricting to application of this method in Vietnam’s enterprises Chapter Research methodology presents the procedure of research, method of research, hypothesis construction and theory model establishment Chapter Research result presents the result of discussion with the experts, assessment of samples and data collection from preliminary and official research Chapter Conclusion and recommendation present the significance of discoveries and give conclusion Based on the conclusion, give some recommendations to help the managers apply ABC in practice CHAPTER 1: OVERVIEW OF RESEARCH This chapter presents the trend of research of ABC method in the world Researches of ABC method in Vietnam are also referred and collected Based on the research results in the world and in Vietnam, research gap will be defined 1.1 Researches of activity based costing in the world Researches of ABC method in the world are divided into two periods and have four opinions (Rong et al, 2009) The first period studies the restrictions of traditional accounting system, recommendation of ABC method and there are two main opinions as follows: - Comparison of product cost between traditional method and ABC method - Comparison of cost distribution based on output criteria and not based on output criteria to explain the fluctuation of general production cost The second period studies the implementation of ABC method, and there are two main opinions as follows: - Review of factors of success when implementing ABC - Survey of this method’s application in practice 1.1.1 Study on weakness of traditional accounting and recommendation of ABC method Miller and Vollman (1985) studies general production cost rate gradually covers a large percentage while employee cost and material cost decrease Traditionally, general production cost is collected and distributed according to the criteria of material and employee, not directly related to physical formation of products According to Kaplan and Cooper (1988, 1998), cost system must three functions as: Valuating inventory reflected in the financial statement, serving operational control, cost measurement for each object For cost measurement for each object, the system must estimate resource utilization for each product ABC method clarifies connection activities between revenue and resource utilization of the unit By highlighting the above relationship, managers work out exactly how to make profit for the unit 1.1.1 Studies of ABC method implementation in the world Swenson (1995) studies the benefit of ABC method in production enterprises The finding shows that enterprises all have positive results when applying this method The companies says that production cost is improved and cost control becomes more efficient Gosselin (1997) reviews from organization structure and business strategy to acceptation and implementation of activity management Study on activity management is divided into three levels: Study on activity analysis, cost analysis for each activity, and ABC method The result shows that companies with competition strategy, and centralized model accept ABC more easily than companies with decentralized model and without functional departments Innes et al (2000) surveys the acceptation of ABC implementation and construction of standard model for ABC for 1,000 units The result shows that there is little positive signs in experience of ABC application There are many companies who give up implementation and are not concern with ABC method Besides, Innes supposes complicated technique and high cost restrict the implementation Cotton et al (2003), in the study on ABC method in New Zealand, finds out that the difference of acceptation between New Zealand and the UK is support of leaders and active participation of accountants Companies which succeed in application decrease cost, valuate products more reasonably, assess result and give more improvement in management According to Cotton, the very high investment cost for this method restricts application in practice In general, studies give the theory of ABC application in big enterprises However, the application result in practice or the acceptation of enterprises is very limited Application in practice is far lower 1.2 Study on activity based cost in Vietnam According to theses at Ho Chi Minh City University of Economics, study on ABC is carried out after 2000, thesis with case study applied in several companies Nguyen Thi Thu Hoan (2005) does case study of ABC to valuate products in Sai Gon Plastics Packaging Joint Stock Company The result helps leaders estimate exactly each product The study limits to the indirect costs allocated to the cost valuation, does not specify the cost for each activity according to the accounting book, identification of difficulties in applying ABC but no details Nguyen Phong Nguyen (2005) combines ABC method with theory of constraints - TOC, for the aim of assessing application level of ABC and TOC in Vietnam The author also gives some limits when implementing ABC such as lack of software, lack of human resources, lack of technique but does not give arguments on this issue The author says that it is very hard to apply new method in Vietnam and support condition such as knowledge and managing ability are deficient Nguyen Thi Bich Thuy (2009) studies on ABC application to support Activity - Based Management, ABM with the aim of deep study on ABC to estimate cost exactly and manage cost The study tries to allocate indirect cost to valuate, other indirect costs related to management and selling are not mentioned The author supposes that ABC issue is too new to be applied in Vietnam Lam Thi Truc Linh (2010) studies on ABC method in ADC enterprise with the aim of applying new method in practice In the unit, there are many product families and support departments The result shows that cost valuation according to new method is different from traditional method However, the topic only allocates costs for valuation, other costs such as selling cost, indirect cost are not mentioned Nguyen Thi Hoang Giang (2014) studies ABC method in Warek Furniture company with the aim of revaluating Giang (2014) carries out steps of cost allocation and revaluation, price of new products is different from current price However, Giang supposes that leaders must support and staff must be trained to apply this new method The author does not say the above issue in specific Thus, studies on ABC in Vietnam are mainly to the extent of applying this method in practice, no systematic study of the impact of applying this method in practice, as well as the causes preventing the application in Vietnam 1.2 Gap of study on factors affecting ABC application in Vietnam’s enterprises According to Douglas (2013), traditional accounting systems for cost in companies often have problem, cost is inexact and unreasonable to give decision The fact that ABC with its advantages gradually replace traditional method is inevitable (Manivannan, 2010) According to Zhang and Che (2010) and Karim (2014), there are few studies on ABC for developing countries, especially rarely studies on problems or obstacles in applying in practice Based on the above studies, it can be seen that studies on ABC application in practice is very few This represents a paradox about theory that new method is concerned but limited to be applied in practice, particularly in developing countries According to Huynh and Gong (2014), there are rarely studies on ABC in practice of Vietnam Besides, studies on factors which prevents new method application in Vietnam’s enterprises systematically is limited This is the gap of knowledge about ABC in Vietnam Summary of chapter Chapter presents the tendency of ABC method in the world, starting from the comparison between traditional accounting system with its disadvantages with new method In addition, this chapter also summarizes studies on this method in Vietnam Studies of Vietnam all suppose that ABC application in practice will have restriction but have not arranged systematically factors which affects on applying this method in enterprises This is the gap that the thesis finds out based on research overview and becomes the direction for next part of Chapter CHAPTER 2: LITERATURE REVIEW This chapter presents the brief history of cost system development, from traditional method formation to ABC method Necessary steps to implement ABC method from building aim, choosing groups and implementing techniques 2.1.Cost accounting system 2.1.1.Development process of cost accounting system According to the development history, cost measurement system is designed through four periods First period: Inappropriate information for financial statement First period exists in new companies or experienced companies based on outdated theory and method Expression of cost accounting system in the first period: - It takes much time to consolidate the statement of the whole company or close end-term ledger - A lot of variances arising at the end of term, actual inventory value is not coherent with value in the ledger Second period of the system: Direct to financial statement with characteristics: - Achieving inquiry of establishing financial statements - Gathering cost by responsibility center, but not by activity However, the system has not provided the appropriate information for the primary purpose of administration: - Excluding costs of activities to calculate the profit for each product, service or customer - Not providing useful information to improve business processes Third period of the system: Adjustment, appropriateness with requirement of management, separation In the third period, the system keeps preparing financial statement for outside objects which is conform to standard, but provides appropriate information about the cost of activities, profit cost for each product However, in this period, the cost accounting system is developed into a separate system by some companies, have not linked to the operating system and sometimes information from the opposite system Fourth period of the system: Consolidation of cost administration and financial statement In the fourth period, information from ABC method and operational response system are consolidated and provided for setting out financial statement with the outside, ABC method provide support information of estimating resources across the unit 2.1.1.Limitation of cost accounting system in companies According to Douglas (2013), cost accounting system in each company is particular However, these systems all have general limitations with the characteristics as follows: Only one allocation ratio is used to allocate indirect costs across the company or apply the allocation rate for one product for all products or services Company changes technology, production management does not change cost recognition accordingly Company has cost allocation principles influenced by outside reporting One characteristic of this limitation is the opinion that which products or services with high revenue must bear much cost According to Douglas (2013), cost accounting systems in companies have many problems of cost recognition Methods recognize that costs in companies are distorted and cost information for giving decision is untrustworthy It is necessary to have a new recognition method that is ABC 2.1.3 From traditional cost accounting to activity-based cost method Formation of traditional cost allocation According to Kaplan’s study (1998), cost allocation is based on weight criteria from the 19th century with four important inventions about management First, the textile mill managers measured how much crude fiber each worker handles from cotton within one hour, and calculate the cost per one finished product Second, the managers in the field of rail measured cost success of each ton per mile for the entire system with the particular characteristics of the field Third, Andrew Carnegie, steel mill manager, measured daily cost Of materials, employees and energy used for steel mill Fourth, based on administration philosophy of Frederick Taylor, managers measured amount of materials, employees and hours for each product Flexible standard and estimated cost system This system was formed in the 20th century, developed by two Germans called Kilger and Plaut, and then popular in academic activities in the world Flexible standard and estimated cost system is based on two principles, one is building responsibility centers to focus on cost planning, cost control, product cost valuation Upgrade and addition of standard cost system GPK system has two major disadvantages as not providing timely information to managers and not providing enough information about the product The period of system improvement fixes the issue of providing information immediately, so the company give solution by connecting server to workstation The second problem, product information, is fixed by adding two measurement criteria of quality and delivery time Kaizen cost system Characteristics of Kaizen cost accounting system is information gathering to accelerate the process of cutting costs The information interesting Kaizen group is to update inventory circulation, used equipment, production area, production efficiency per hour, saving materials and substandard products The information about actual costs is updated for each group for their self-determination of cutting costs the most reasonably Responsibility center for Pseudo profit This system is carried out by that unit itself builds an easy-to-understand statement of business result Revenue is estimated by an amount of products multiplying the estimated selling price for external market, costs are aggregated from production cost of material and labor, arisen financial cost, waste product costs, allocated infrastructure cost, etc By estimating profit, managers will optimize what can be profitable such as utilizing excessive power, cutting waste product However, this system is unable to recognize cost of products exactly 2.2.Activity-based costing 2.2.1.Concept of activity-based costing When studying on application and implementation of ABC, Douglas (1992, page 33) gives the concept as follows: “Activity-based costing (ABC) method is a cost accounting concept based on the premise that products require an organization to perform activities and that those activities require an organization to incur costs In activity – based costing, system are designed so that any costs that cannot be attributed directly to a product flow into activities that make them necessary and that the cost of each activity then flows to the product(s) that make the activity necessary based on their respective consumption of that activity” 2.2.2 History of activity-based costing Period Related to Period Period Phase Phase Phase Indirect cost Relationship Subclass of Production and of product activityactivity and variations and activity product process Approach Limited range Focus on Product cost valuated exactly Achieve Limited range Exact cost accounting system Limited range Limited range Period Production activity Information of – entire business activity – activity management result Wide range Product cost Product cost for Cost strategy for decision strategic decision planning ABM Production management process analysis system Period Wide range Building indexes of activity result Fighting ability of Consolidating enterprise solutions of activity result management source: Moisello (2012) page 56 2.3 Steps of activity-based costing implementation There are many studies on the procedure of ABC method Since Kaplan and Cooper (1988) built basic steps, next researchers all wanted to add more implementation steps with the aim of applying this new method in practice In general, technical steps to carry out ABC method as follows: (1) Develop objectives of implementation (2) Build group of implementation (3) Identify main activities (4) Charge for each activity (5) Determine the second allocation criteria 2.3.1 Develop objectives for ABC method implementation According Adebayo (2006), when deciding to implement ABC method, managers need answer the following questions to establish implementation objectives: (1) What is primary motivation for implementing new method? (2) Which objectives is stated for implementing ABC method? And how to design in reality to comply with the statement of objectives? (3) How to make this method become an official function of the company? Or how to make external model become intrinsic needs of the company? (4) What is the real role of ABC method in the company? 2.3.2 Build group of implementation Group of implementation need a leader who has knowledge of new method and management, accountant for data collection, several staff who know production or main activity of the unit, several other staff who will handle forms and documents to gather procedures and implementation steps for the group 2.3.3 Identify main activities According to Turney (1996), description and identification of business activities is considered as the heart (main point of the entire ABC structural design) Dury (1996) defines activity as event, operation, a job with a specific purpose To identify activities, it can apply one of the following ways: building dictionary of activity, functional analysis 2.3.4 Charge for each activity After identifying activities, next step is calculation of cost for each activity based on the financial system or ledger (Kaplan and Cooper, 1998) This period is considered the first cost allocation During this period, resources will be calculated directly for each specific activity, or for various activities depending on the level of service 2.3.5 Determine the second allocation criteria Criteria selection can be done by interviewing people who work frequently in this activity Kaplan and Cooper (1998) argues that there are three forms of allocation criteria Profession based criteria When applying this criteria, it just needs to count number of implementation to allocate Time based criteria This criteria uses time to assess activities Time based criteria will be more expensive than profession based criteria because it is necessary to calculate the length of time for each activity Intensity based criteria This criteria charges directly for each activity It should only be used when activities require to use special resources to implement 2.3.6 Allocate activity cost for final cost objects According to Cooper (1990), ABC method is divided into two periods of cost allocation, the first period allocates from ledger to activities and the second period allocates from activity cost to each final cost object In the first period, cost is calculated by total cost dividing number of activities In the second period, based on times of activities to charge, times of using multiple fee of one activity by cost for that object 2.4 Factors affecting on activity-based costing application 2.4.1 Knowledge limitations of ABC The first preventing factor is that knowledge limitation makes ABC approach not to be carried out This limitation shows that participants not know benefits of ABC method, or understand the processes in the unit to support implementation In addition, participants must understand theory of new method, and change the perception of information that accounting system brings 2.4.2 ABC Resource limitations affects on ABC design Once being aware of the concept and benefits of the ABC method as the first obstacle, second, managers will perceive lack of resources for application The resource limitations are lack of time allocating staff in the project, lack of computer resources and budget for system design analysis, lack of good staff and experts in model development 2.4.3 Psychology of not wanting to change prevents ABC design and construction Besides two above-mentioned obstacles, there is an important issue to consider, psychology of change resistance and new system receiving of the participants Expression of psychological resistance is to be afraid to change when taking part in implementation, suppose that theory of new method is two difficult, be scare of firing due to failure, be afraid of a huge amount of initial analysis data Thus, new method is considered to be competitive with the current management model, or self-view psychology realizes lack of the elements needed to implement 2.4.4 Activity strategy affects on ABC selection One of the decisive factors, which make an accounting system change to ABC, is strategy The activity strategy can affect use of ABC is direction to the valuation structure, advantage competition, new product development If the unit has not paid attention to this strategy, it will not want to implement ABC method 2.4.5 Affect of senior manager support Support of senior managers is a key element, deciding the advantage in idea formation, analyzing and implementing ABC method Therefore, without manager support in the company, ABC implementation project will be almost stagnant or eliminated Sign of support lack is not to support resources for implementation, constantly change the participants, not to support solution of conflicts, not be tough enough to force departments taking part in 2.4.6 Limitations of implementation technique Numerous studies in the first period of ABC method refers that technical issues is a major obstacle in application Related technical issues mentioned are to identify amount of activities reasonably, to include activities into groups, to select criteria for allocating costs, to charge for activities difficultly, software not meeting its aim, difficult to maintain the system, deficiency of data 2.4.7 Couching and training affects on ABC method When studying obstacles of ABC application in enterprises, Moisello (2012) argues that factor of couching and training plays an important role Obstacles are represented as not considering training issue at the beginning, not considering consultancy of experts, not changing training program reasonably, non-constant train These issues prevent new method acceptation in practice 2.4.8 ABC organizational structure affects on ABC implementation When implementing ABC, companies must re-design ICT system This changes power structure, therefore new method application will be affected if organizational structure does not change Signatures of unreasonable change of organizational structure are that power structure has not change appropriately, activity strategy has not changed, organizational structure has not been flexible, and culture has not opened to receive new things 2.4.9 Building target for each period with reward According Adebayo (2006), companies participating ABC method usually include three types: passive because of competitive pressure, tendentiously imitating other companies to use this method and active because of demand for system administrators When failing in implementation, each company has a specific reason Several companies only invest ABC method in compulsory form without investment of operating principles Some others not divide targets for each period Some others not build reward system leading to discourage the spirit of employees 2.4.10 Limitation of ABC application in enterprises According to Martha (2014), this method limits practical application, expressed as follows: information users not use ABC method, leaders are not interested in benefits of this method, at first the method is invested then is not used, the method is not used because of not serving for taxation, financial statement, the method is only studied but not applied, companies refuse to use models at the beginning 2.5 Background theory related to the thesis content In order to be the basis for arguments of theories and hypotheses as well as variables constructed for theoretical models, some background theories are introduced as the basis of building arguments of the thesis 2.5.1 Behavioral theory Behavioral theory is a subsystem of psychology It was born around the beginning of 20th century Behavioral theory initially studied human psychology, then expanded into administration behavior This theory studies psychological reactions of individuals in situations considered as threatening, fear, feeling responsible, feeling left back, feeling positive in front of benefits, or reacting to overcome fear Based on that, theory models a sequence of psychological reactions from awareness to action Based on psychological studies, Gary (2012) and Brent (2012) described reaction of the staff involved in the ABC implementation project They started from the psychology of participation refusal, angriness and shock with changes, fear and confusion, to gradual acceptance and excitement 2.5.2 Theory of information system According to Leo (1998), this theory starts from mid-1960s with the primary role of discussing about skills to choose right data and technical solutions of data processing In the second period, this theory focuses on handling data sources, design and effective application of information system The third period starts from 1990s, this theory gradually interferes in management issues, studies on innovation of solutions for effective administration When studying on information theory, March and Smith (1995) and Shirlay (2002) argue that the awareness and behavior will be affected by information that people receive Therefore, when studying on how perception affects ABC use, Douglas (2013) and Mathar et al (2014) says there is a relationship between ABC theory awareness and decision to use this method in company 2.5.3 Theory of benefit and cost Theory of benefit and cost starts in 1808 by Albert Gallantin mentioning in an irrigation project to compare benefit and cost Essentially, this theory studies the behavior of giving decision based on that benefit subtracts related cost of a project If the benefit is higher than the cost, the project will be chosen Based on the content of this theory, it can be seen that authors studied on ABC method based on this theory to argue for his viewpoint Adebayo (2006) says that it is necessary to consider the purpose of implementation and benefits of information from this method compared to cost before implementing Summary of chapter It can be seen that the development history of cost accounting originate from the industrial revolution Managers always want to estimate exactly cost for products and services in order to determine the effectiveness Traditional cost accounting was founded on the achievements of the labor cost calculation of fiber industry, distance conversion of railroad industry, material cost track of steel industry, and Taylor’s thought of spliting work Initially, traditional cost accounting met management demand However, as the production developed, this method was no longer appropriate and ABC was born ABC method is expected to be a new way for managers to obtain effective information about the operation of the whole enterprise However, the application in enterprise even leaves obstacle The obstacle is caused by: limited awareness, limited resources, psychological obstacle, technical limitations, etc CHAPTER 3: RESEARCH METHODOLOGY Chapter introduces factors which limit to apply ABC method in Vietnam’s enterprises Chapter will present research methodology, research procedure, and build hypothesis and research model 3.1 Research methodology 3.1.1 Research methodology for the thesis In chapter 1, the gap of thesis indicates that it is necessary to study on factors that limit the application of ABC method with specific characteristics in Vietnam’s enterprises, and to measure the impact of these factors For the purpose of this thesis, applying mixed methods and sequencing survey is appropriate Sequencing survey is conducted in two periods, the first period collects and explains qualitative data to find out factors that restrict the application of ABC method in Vietnam, the second period collecs and analyzes quantitative data to assess the impact of these factors on preventing ABC application in Vietnam 3.1.2 Research procedure Research procedure has three major steps as follows: Step 1: Study documents, establish research model, and design preliminary questionnaire First target is determined as finding out factors which prevent ABC application in enterprises The thesis uses the first tool, researching related documents Previous related studies are aggregated and compared to find out factors that prevent ABC application This factor may not be suitable for unique characteristics of Vietnam’s enterprises so it should be discussed with the experts to adjust The answer of the experts were collected and compared to detect new factors not mentioned by theory At the end of the first period, factors preventing ABC application are built and calibrated to be appropriate with the situation of enterprises in Vietnam Step 2: Preliminary research, scale adjustment, official questionnaire establishment The second target is to measure these factors to assess their impact level Firstly, it is necessary to evaluate the reliability and value of the scale before the official assessment, in order to evaluate and calibrate the scales built in the first period for official survey Results are satisfactory variables, that questionnaire is officially established and is the basis of next step This step of survey is a part of the second period, quantitative analysis in sequencing survey strategy, the main part of the quantitative survey belongs to the official research step Step 3: Official research, impact assessment of factors After the preliminary survey of adjusted whole scale, some observed variables can be eliminated if inappropriate After the preliminary survey, a survey questionnaire is completed officially Number of surveys sent to the unit are 350 The results obtained from this step is the model of impact assessment of factors affecting ABC application in Vietnam’s enterprises 3.2 Building hypothesis, establishing research model and scale 3.2.1 Building hypothesis Based on study of impact factors in 2.4, hypotheses of impact factors are built as follows: H1: Awareness limitation of ABC prevents this method application H2: Lack of resources affects on analysis and design of ABC H3: Psychology of change restriction is the obstacle for analysis and design of ABC application H4: Business strategy requiring ABC application has not been developed H5: Lack of leadership support is the failure factor in ABC application in the units H6: Limitations of application technique is the failure factor in ABC in the units H7: Being unconcerned with training and couching affects much on ABC application H8: The fact that organizational structure does not change appropriately limits ABC application H9: Not building objectives for each period together with well-deserved reward prevents ABC application in practice 3.2.2 Theoretical model Based on the above studies, ABC application in practice encounters a lot of obstacles Unsuccessful application of ABC in enterprises is impacted by factors, including: (1) Awareness limitations (2) Lack of resources (3) Psychology of change limitation (4) No business strategy requiring ABC (5) Lack of leadership support (6) Limitation of application technique (7) No concern of training (8) Inappropriate change of organizational structure when applying ABC (9) No building objectives for each period together with welldeserved reward Research model are recommended as follows: Y = a0 + a1X1 + a2X2 + a3X3 + a4X4 + a5X5 + a6X6 + a7X7 + a8X8 + a9X9 + e In that: is called regression coefficient, or represents impact level of reason i to Y e is considered as the balance of regression balance or impact level by other factors which are not found out Figure 3.2 Factors impacting on ABC application in Vietnam’s enterprises 3.2.3 Building scale in measurement model Y- “Limitations of ABC application in Vietnam’s enterprises” To measure for dependent variables, the research designs observed variables as follows: Y1: Information user makes decision without information from ABC method Y2: Leadership with no concern of ABC benefits Y3: Investing at the beginning but no use afterwards Y4: No use because of not serving tax, financial statement and auditing Y5: Do research but not apply Y6: Refusing to use ABC X1 – “Awareness limitation” X1.1: No awareness of ABC benefits ABC X1.2: No understandings of operating procedure of the company X1.3: No understandings of ABC theory X1.4: No proper awareness of the necessity of a good accounting system to make right decision X1.5: Benefit not commensurate with cost X2 – “Lack of resources” X2.1: Lack of time arranged for the staff X2.2: Lack of resources of computers and support software X2.3: Lack of implementation budget X2.4: Lack of good experts, experienced accountants with ABC X3 – “Psychology of change limitation” X3.1: Being afraid of change impacts on ABC method building X3.2: Theory of ABC is difficult X3.3: Afraid of failure, being evaluated and fired X3.4: Afraid of collection, processing big data at the beginning X3.5: ABC method is considered to bring competitiveness rather than support for current programs X3.6: Self identification of resources lack without careful consideration affects ABC acceptation 10 X4 – “No business strategy requiring ABC” X4.1: No strategy of cost structure change, direction to valuation, no ABC application X4.2: No strategy of advantage competitiveness, no ABC application X4.3: No strategy of new product and market development, no concern of ABC X5 – “Lack of leadership support” X5.1: No support of resources for ABC implementation X5.2: Individual change in implementation group X5.3: No support of conflict solution among departments X5.4: Not being tough to force departments to participate X6 – “Limitation of application technique” X6.1: Being hard to identify number of reasonable activities for appropriate information supply X6.2: Being hard to identify and merge activities into groups X6.3: Being hard to select criteria of allocation X6.4: Charge of activity X6.5: Support software does not meet the objectives X6.6: Being hard to maintain ABC system for frequent update of activities in companies X6.7: Deficiency of data to use software of implementation support X7 – “No concern of training” X7.1: No consideration of training and couching issue at the beginning restricts ABC implementation X7.2: Expert’s support is not considered when implementing X7.3: No change of training process to be suitable for each step of ABC method X7.4: Non-constant training and couching even when applying ABC successfully X8 –“Inappropriate change of organizational structure when applying ABC” X8.1: Power structure does not change in accordance with periods of ABC application X8.2: Operational strategy does not change when ABC is considered to be applied X8.3: Organizational structure is not flexible to apply ABC X8.4: Company culture is not ready to receive new thing so it is impossible to implement ABC X9 – “No building objectives for each period together with well-deserved reward” X9.1: Form is invested more than principle X9.2: No building each step of implementation and specific objectives X9.3: No building reward system for each objective to encourage the staff 3.2.4 Questionnaire design In this thesis, there are two questionnaire, one for discussion with experts (qualitative survey), and one for preliminary investigation (quantitative survey) For questionnaire for discussion with experts, its objective is to collect additional opinions of factors which prevent ABC application in Vietnam’s enterprises Questions in this qualitative survey are open, in order to collect experts’ opinions Based on the above discussion result, structural questionnaire is used to collect data by preliminary investigation and official investigation in quantitative analysis Its objective is to collect data for reliability evaluation and measuring value of scale in preliminary investigation After evaluating preliminary investigation result, official questionnaire is used to collect data for regression model inspection to assess impact level of mentioned factors in suggested theoretical model Summary of chapter Chapter presents mixed method by sequencing survey that the thesis chooses to achieve the initial objectives In the period of qualitative survey, background theoretical survey tool is used to consider related researches in order to build impact factors To determine if factors are suitable for Vietnam characteristics, case study and interview with experts will be implemented to add and discover new factors At the end of this period, theoretical model is built Inspection is divided into two steps, preliminary inspection and official inspection This is the main content of next chapter 11 CHAPTER 4: RESEARCH RESULT This chapter focuses on solving main issues of the research as follows: (1) Presenting investigation result with experts (2) Presenting preliminary investigation result to inspect scale (3) Present official investigation including introduction of samples, methodology, and subjects (4) Inspecting CFA (Confirmatory Factor Analysis) to examine the appropriateness of scale in official research (5) Inspect regression model to evaluate theoretical model 4.1 Investigation result with experts 4.1.1 About factors affecting on ABC application Experts all unify that there are nine factors preventing ABC application in Vietnam’s enterprises, similar to researched theoretical model Impact level will be revaluate by data collecting in the official investigation presented in the next part 4.1.2 About scale assessing ABC application limitation Scale of factors and expression of ABC limitation agree about way of assessment This result is the basis of building preliminary questionnaire to assess and inspect the scale in next steps 4.2 Preliminary investigation 4.2.1 Description of preliminary investigation The number of questionnaires sent by the accounting firms is 180; the number of responses to the questionnaires is 180, 161 of them are valid and 19 of them are invalid vacant due to not giving answers to many questions Survey period is from January 2015 to May 2015 In terms of activity type, among 161 companies involved in the survey, there are 71 manufacturing companies (44.1%), 37 companies engaged in commercial activities (23%), 43 service companies (26.7%), construction companies (3.7%) and agricultural, forestry and fishery companies (2.5%) Currently, 43 companies are using the output criteria to allocate the cost, accounts for 26.7% 44 companies are using the material value criteria as a basis for the cost allocation, accounting for 27.3% 34 companies are using the workforce criteria to allocate the cost, accounting for 21.1% 28 companies are using the time for operating machine as the criterion for distribution, accounting for 17.4% 12 companies are using other criteria for the cost allocation, accounting for 7.5% The result is that respondents are very satisfied with the applied criterion, accounting for 2.5% 83 people reply that they are satisfied, accounting for 51.6% 67 respondents are not pleased with the current criterion, accounting for 41.6% people are dissatisfied with the criteria for the cost allocation, accounting for 4.3% 4.2.2 Assessment of reliability of the scale The criteria for the scale assessment need require following conditions: - Cronbach's alpha coefficient is greater than 0.6 - Corrected Item-Total Correlation is greater than 0.3 The result shows that the variables that not fulfill the requirements include Y3, X2.1, X3.6, X5.2, X6.7, X7.2 4.2.3 Scale value assessment - Exploratory factor analysis It is necessary to assess the value of scale including convergent value and distinct value, Exploratory Factor Analysis (EFA) is used to evaluate the two values To use the method of EFA, we have to consider two necessary conditions involving samples and Kaiser - Meyer - Olkin index (KMO) Normally, KMO index ranging from 0.5 to is the sufficient condition for the factor analysis Besides, it is necessary to check an additional condition that is the Bartlett index, this test helps determine if KMO indicators or statistical significance For KMO to meet the standard, sig value of Bartlett need to be less than 0.05 for statistical significance 12 KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy Bartlett's Test of Sphericity 759 Approx Chi-Square 5032.972 Df 595 Sig 000 The result shows that Eigen value reaches 1.064, which is greater than with factors is reasonable compared to the given model The addition of the 10th factor will turn this value into 0.985, which is less than 1, violating the given condition The collect value of the Total Variance Explained is 0.76817, which is greater than 0.5 This means the given factors can explain 76.817% of the variation of data 4.3 Official investigation 4.3.1 Descriptive statistics of formal investigation The purpose of the research is to focus on the enterprises operating in Vietnam The total of enterprises was 448,000 (quoted from the source of General Statistics Office, 2012) Surveyed elements were enterprises customers of the auditing firms that own a stable accounting apparatus and always desire for a better accounting information system Subjects that were given the questions include chief accountants, general accountants, and financial directors of the enterprises The quantity of questionnaires was 350 The period for survey was from June 2015 to October 2016 The collect results were 320 responses, 317 of which were valid The next step was entering the data in Excel to conduct the adjustment of data, and the edited data will be input in the SPSS 20 for the statistics Of the 317 valid votes, there are 154 manufacturing enterprises accounting for 48.6%, 72 commercial enterprises accounting for 22.7% and 66 services business accounting for 20.8%, respectively, 66 companies and 15 construction enterprises and 10 companies operating in the agricultural and fishery sectors accounting for 4.7% and 3.2% of the sampling structure 4.3.2 Verification of CFA Confirmatory Factor Analysis is used to evaluate whether the variables included in the model fit the actual data or not This is a form of general assessment of variables, which is essential to the evaluation of regression mode 4.3.2.1 Check on the reliability of the scale The result of the check on the reliability by Cronbach's alpha shows that 40 out of 40 observed variable are consistent (qualified) All the factors are correlated with the total variation that is greater than 0.3 and Cronbach's alpha coefficient is greater than 0.6 As a result, it can be concluded that after the preliminary research, the elimination of observed variables that not meet the requirements ensure the reliability of the scales used in the model 4.3.2.2 Check on the value of scale The result of EFA shows that KMO coefficient is 0.792, Sig value achieves 0.000 This indicates that EFA is consistent with the market data and the observed variables are correlated with each other (Table 4.55) Total Variance Explained is 79.013% (greater than 60%), which points out that the extracted factors can explain 79.013% of data variables After EFA analysis, there is no disorder of observing variables among components, initial component names remain 4.3.2.3 Confirmatory Factor Analysis – CFA To assess if CFA analysis meets requirement, the following values need to be paid attention: P value (sig.) ≥ 0,05; CMIN/df ≤ up to ; GFI, TLI, CFI ≥ 0,9 ; RMSEA ≤ 0,08 The result shows that all the index measuring the fit of CFA are satisfactory Chi-square/df is 1.640; TLI is 0.966; CFI is 0973; RMSEA is 0.045 In conclusion, this model matches the surveyed data and achieves the unitary feature 13 4.4 Regression tests 4.4.1 Theses tests 4.4.1.1 Selection of function forms for independent variables In order to determine the best regression model consistent with market data, the research examines several forms of functions (Linear, Logarithmic, Exponential,) on the variables X j (j = 1,2 , , 9) to consider the relationship between the independent variables and the dependent variables Y The results of analysis and test indicates that the observation data of variables matches linear form 4.4.1.2 Check on the multicollinearity, autocorrelation and heteroscedasticity To test the multicollinearity, we usually use VIF index According to the rules, in case VIF is greater than 5, multicollinearity occurs According to the result of analysis, we have the indicators of multicollinearity including Collinearity and VIF are equal to (small) This fact proves that multicollinearity does not occur in the model, which is based on the formal research data The results collected from SPSS show that the regression residual is approximately equal to standard normal distribution N (0.1); the average value is and the standard deviation achieves approximately 1, which points that distribution of Y and the residual occur randomly Besides, the check of the autocorrelation with the Box Ljung shows the sig value is greater than 0.05; so there is no correlation between the residuals According to the collected data for the formal study, the usage of SPSS makes the value of Y increase but the remainder is scattered around a value of 0, so it can be concluded that heteroscedasticity does not occur 4.4.1.3 Correlation of variables in model As the result of calculate, correlation of variables in model is under ≤ 0.9 That means variables are suitable in model 4.4.2 Estimation of regression coefficients: The result of calculation and multiple regression analysis through using SPSS 20 software, the result table is followed: Variables (components) Non-standardized coefficients regression Standardized regression coefficients Verification value (t) Sig value 000 1,000 Coefficient Error (Constant) -1.571E-017 026 X6 639 026 639 24,825 000 X3 577 026 577 22,411 000 X8 122 026 122 4,745 000 X4 234 026 234 9,074 000 X1 150 026 150 5,807 000 X2 136 026 136 5,281 000 X9 134 026 134 5,214 000 X7 137 026 137 5,302 000 X5 103 026 103 4,005 000 According to SPSS result, the value of a0 is quite small so the regression model is written as following: Y = 0+ 0,15X1 + 0,136X2 + 0,577X3 + 0,234X4 + 0,103X5 + 0,639X6 + 0,137X7 + 0,122X8 + 0,134X9 + e 4.4.3 Inspection of regression coefficients After calculation and estimation of regression coefficients, statistic inspection value t and probability value 14 (table 4.61), we will inspect the follwing hypothesis (10 hypothesises) Hypothesis Ho: aj = Opposite hypothesis H1: aj ≠ (j = 0, 1, 2, , 9) Inspection value t shows that coefficient a0 has no statistic significance, a1 to a9 all have statistic significance or reject Hypothesis Ho and accept Hypothesis H1 that regression coefficient ≠ Result of research model as below: Y = 0,15X1 + 0,136X2 + 0,577X3 + 0,234X4 + 0,103X5 + 0,639X6 + 0,137X7 + 0,122X8 + 0,134X9 + e 4.4.4 Inspection of model appropriateness This is the most important work of any statistic procedure, model construction from data must prove the appropriateness of model Inspection F is used to inspect t is hypothesis and equivalent to inspection F in ANOVA If variables of regression is much bigger than variables of balance, model is more appropriate Sig value (P value) of F is smaller than given α (usually 0.05) to evaluate the appropriateness of model Adjusted coefficient R2 is used to evaluate the appropriateness The bigger the coefficient is, the more appropriate the model is In order to inspect the appropriateness of model, we inspect the following hypothesis: Hypothesis H0: R2 = Hypothesis H1: R2 ≠ Result of calculation and analysis on SPSS as follows: Adjusted R2 of 0.894 shows the appropriateness of 89.4% of model compared to the fact or variable X can explain 89.4% of change significance for variable Y 4.4.5 Confidence intervals of regression coefficients Independent variables Regression coefficients following The confidence interval of the regression coefficient (95%) Lower bounds Upper bound X6 639 denominator 589 690 X3 577 526 628 X8 122 071 173 X4 234 183 285 X1 150 099 200 X2 136 085 187 X9 134 083 185 15 X7 137 086 187 X5 103 052 154 4.5 Some discussions of research results After taking advice from experts of the factors hindering the use of ABC methodology in Vietnam, we find out that there are nine factors that hinder the application of this method in practice These factors are awareness limitations, lack of resources, psychology of change limitation, no business strategy requiring ABC, lack of leadership support, limitation of application technique, no concern of training, inappropriate change of organizational structure when applying ABC, no building objectives for each period together with welldeserved reward Therefore, the result of qualitative survey reaches the first research target because it shows nine factors that have an impact on the distinctive characteristics in Vietnam Showing the factors is the first step in the list of objectives of the thesis The next problem is the assessment of the impact of each of these factors in the context of applying the ABC method for Vietnam’s enterprises This is also the second objective of the thesis To specify the impact, the quantitative survey is conducted aimed at testing the theoretical regression model mentioned in the first objective After the process of collecting data taken on the research sample, we receive the following results Component Regression coefficients Contribution (%) X1 – Awareness limitation 0,150 6.7 X2 – Lack of resources 0,136 6.1 X3 – Psychology of change limitation 0,577 25.9 X4 – No business strategy requiring ABC 0,234 10.5 Component Regression coefficients Contribution (%) X5 – Lack of leadership support 0,103 4.6 X6 – Limitation of application technique 0,639 28.6 X7 – No concern of training 0,137 6.1 X8 – Inappropriate change of organizational structure when applying ABC 0,122 5.5 X9 – No building objectives for each period together with well-deserved reward 0,134 6.0 (according to the calculation material resource of author) Based on the result of the table 4.67, we can see the greatest impact of technical restrictions on the application of the ABC method to enterprises in Vietnam, making up 28.6% of all the factors This result shows that this study is suitable for the countries that start considering applying the ABC method The research on the use of ABC method in every enterprises in Vietnam also indicates that technical problems are also considered a obstacle Thus, the statistical data that the thesis collected is suitable for current situation in Vietnam’s enterprises and the areas that begin the research and the theoretical application of ABC method to accounting information Compared with previous study on separate application of ABC method, the thesis specify the technical restrictions that Vietnam is facing now These issues are also carefully considered through the test of the scale and the reliability The summary of Chapter Chapter presents the results of the consultation of experts in order to determine the factors affecting the 16 application of the ABC method to enterprises in Vietnam This chapter also gives the results of testing and adjusting the scales to get a complete survey used for the formal study The sample collected from the official testing result shows that the scales achieve the reliability and the values (convergent value and distinct value) CFA expresses that the given model is consistent with the theory The coefficients in the multiple regression model also can explain the impact of each factor on applying the ABC method to enterprises in Vietnam In addition, checking multicollinearity, autocorrelation and heteroscedasticity enhance the match between the model and the reality CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS 5.1 Main results From the research results in the Chapter 4, this section summarizes the key results According to the research in the world, the ABC method has many advantages The information taken from this method redrawn the entire map of the business activities This map shows that the main activities that require the largest amount of cost have the ability to help to increase the profit Meanwhile, it is important to reduce or eliminate the activities that have no contribution to creating good values The information from this method presents that it is necessary to focus on the products, customers and distribution channels that bring the most profit The ABC method is very successful in academics Quite a lot of researches on this method such as the implementation process and the factors helping this method gain the success However, in reality, the rate of the application is very low, which is seen as a paradox In the context of the crisis from 2010 to 2015, the urgent requirement is the arrival of a new method of cost administration to help businesses survive and increase the competitiveness With such requirements, this thesis defines the objective of seeking the factors obstructing the application of the ABC method and the impact of each factor Based on the previous studies and advice from experts, the thesis lists nine main factors including limited awareness, limited resources, psychological change, no business strategy that requires the use of the ABC method, no support from leaders, limited applied techniques, no investment in coaching and training, unsuitable organization structure, no specific targets for each stage associated with well-deserved reward The next major objective of the thesis is measuring the impact of these factors aimed at helping businesses select a right solution Applying the knowledge of Pareto chart and the 80/20 rule knowledge to measure the level of materiality of each factor The figure 5.1 shows the influence of each factor, the key areas and main factors The results shows that the first three factors have the strongest influence, making up 65% of the level of influence The technical restriction accounts for 29%, the limited psychological change accounts for 26%, the failure of building suitable business strategies occupies 10% The next three factors include limited awareness, no investment in coaching and training and the shortage of resources makes up 19% of the level of influence Other factors including no specific targets for each stage associated with well-deserved reward, unsuitable organization structure and no support from leaders holds 16% The statistical data also shows that the collection of samples and research models of the factors have the high reliability, the studied factors can explain 89.4% of the level of influence on the use of ABC methods in Vietnam’s enterprises Pareto chart of the factors affecting the restrictions applying the ABC method 17 5.2 Recommendations related to the results of research The role of modern accounting is handling the issue of costs This task becomes increasingly important and difficult in the competitive environment with rapid changes in these days (Kaplan and Cooper, 1998; Douglas, 2013) A complex cost accounting system does not really ensure the high accuracy (Douglas, 2013) ABC is considered a useful tool for solving these cost matter of the companies (Kaplan and Cooper, 1998; Kaplan and Anderson, 2004; Williams, 2012; Gary 2012) According to the result of analysis in the Chapter and Figure 5.1, it can be seen that there are factors affecting the use of the ABC methodology in Vietnam and if finding out the solution having the effect on these essential factors, it is possible that the majority of problems will be solved 5.2.1 Technical restrictions The first factor making a strong impact on the implementation of ABC method is the technical limitations The problems include identifying the reasonable number of activities, selecting distribution criteria, maintaining the ABC system and choosing the supporting software Identifying the reasonable number of activities is the basic problem in the implementation of ABC and considered the premise of conducting next steps in a series of technical steps for the application of the ABC method There are many ways to properly identify the activities, which depends on the features of enterprises However, the simple way that can apply on almost all of them is looking at the last subject that enterprises provide the services The last subject of the enterprises may consist of the products or services, obtained revenue or customers The asked questions are “what does the final subject need” and “how can we meet the requirements of the final subject” With the support of mind map, the activities will gradually be displayed with the purpose of meeting the demand of the final subject The activities can be ranging from the assembly of products, the transport of goods to customers, the manufacture of parts, the quality test to the last activity This is an adverse process which starts from the requirements of the last subject to find out the first activity Another solution to identify the main activity of the unit is the construction and the analysis of the production process based on the manufacturing process that will separate the activities for each subject When separating the activities in the unit, technical problems of the implementation of ABC method are almost resolved However, too many detailed activities will have negative impacts on applying the method In terms of the experience of 18 implementing, the number of main activities in the unit should range from 30 to 40 The activities should be classified based on their function The classification depends on the major functions of the activities For example, for after- sales activity, it is necessary to answer the questions of customers, maintain the relationship with customers and repair products Grouping the activities will make the process of collecting and handling the information collected simpler and help to meet the demand for the information of managers A problem related to the activities analysis is that a dictionary for activities should be created after the analysis This dictionary describes the activities, the included costs and the method of analysis for the description of activities This step is the final one in the analysis of activities that plays an important role but quite a few units often skip it We take an example of the research by Nguyen Xuan Hung and Nguyen Viet Hung (2016) which is successful in applying on the analysis of the basic activities of the enterprises of maritime services to effectively use the cost allocation method based on the feature of activities Initially, because of not separating the activities related to each service, each customer, identifying the result of business for each service faces to a lot of difficulties The business result is just revealed when posting all the costs and revenue Enterprises have no awareness of effective activities and have the difficulties in negotiating with customers on prices for each service package After describing and rewriting process for each service and each activity, which starts from the questions “What activities does this customer or service need?” These activities will be redrawn and described in the text From there, the accounting department in collaboration with executive department will calculate the cost for each activity and flexibly select the allocation criteria consistent with the nature of production As a result, the cost of all the services will be calculated exactly; the information from new method helps board of managers give suitable decisions and the profits will continuously increase The sales department uses the information from the method of cost allocation to negotiate new prices with customers for each service in the attached service package Operating department can consider the information to adjust and improve the methods in order to reduce costs The accounting department uses the information about the cost allocation method to build the estimation system with the high accuracy The second issue of deployment techniques is the selection of distribution criteria In theory, it is possible to base on three criteria including the number of times, time and the intensity For companies with simple production processes and stable production, it is suggested to choose the frequency criteria to easily control The companies with flexible production process can select the time criteria to easily control The companies that have unique products and require high technique the intensity criteria to match the technical characteristics of the products or the customers of the unit The selection criteria can be flexible and companies can apply various criteria while implementing ABC It is not necessary to only one criterion Each of them has it own advantages and disadvantages The choice depends on the manufacturing process or necessary activities A note is that for one activity, the company can change allocation criteria in different periods In the early stage of implementation, companies can choose frequency criteria But after updating the information in the dictionary of activities, the time criteria can be used because it is appropriate in the current circumstance Another way to solve this technical problem which receive the concern of many researchers is the time criteria that is applied for the whole process of cost allocation method estimated according to on the activities(Time - Driven activity Based Costing, TDABC) This method was suggested by Kaplan and Anderson (2007) A key feature of this method is that listing the activities according to the time and use time as the allocation criteria With this approach, the cost of evaluation, the maintenance of cost allocation method will be simple and help to reduce the cost, and will detect free time for the use of resources The way of conducting this method only has some basic difference of time criterion with the original method For Vietnam’s enterprises, it is feasible to apply this one in practice to simplify the application, reduce training costs This one is also appropriate for small and medium-sized enterprises (Henrik and Erling, 2011) We will take the example of the success of Sirirat et al (2010) This person is successful in applying TDABC to the enterprises of transport in Thailand The analysis of the main activities only consists of activities (the preparation for the goods delivery, checking - printing bills, the operation of loading, transport, unloading and warehouse) and key resources related to the activities (equipment - office, human resources, computer systems, trucks, warehouses) The companies have specific time for activities and use the mathematical model to allocate the activities and the costs for routes and customers The result is that the companies identify the services, goods, customers that bring profits, and some cause the loss during the operation of the company As a result, the company make the appropriate adjustments to the customers that suffer the losses The next problem is maintaining the ABC system in the unit When set out, this method becomes a tool for providing information The ABC method needs to inputting data, handling information, printing and reporting For the initial units, the first version is often imperfect; handling information is quite slow, the amount of data is large and the report does not meet the needs Thus, it is necessary to maintain and upgrade the ABC method in the unit Periodically, individuals involved in the project need to review to improve the system for the analysis of activities, the selection of criteria, the sample of report The maintenance will gradually help the unit improve 19 the system to provide accurately information and reduce the expenditure The selection of supporting software is flexible options and depends on each company For the companies having simple processes and small scale, it is possible to use a spreadsheet, or some analysis programs of the ABC method with small value The operation of a spreadsheet or simple programs have the advantage of low cost and the update or the analysis of activities for the unit In contrast, for the companies with the complex scale, spreadsheets or small programs may be inappropriate The selection of software depends a lot on the project leader If specific requirements are set out, it is easier for the selection of software In summary, technical limitations in the ABC method seems to be a big problem of the countries that start to seek the way to implement and apply it This problem can be easily solved when the nature of the ABC method is discovered This method is used to allocate the costs and direct toward the final subject that the company provides services Understanding the nature will make the analysis of activities, criteria selection and maintaining the system simpler The selection of software will depend largely on the method of activity analysis, the choice of criteria and budget However, the spreadsheet is still preferred and actively support the analysis and the update of data 5.2.2 Limited psychological change According to the results of regression model analysis, the second factor is limited psychological change Particularly, it comes from the concern about the capacity assessment and the sack, the difficulty of implementing the ABC method, dealing with the initial data and the shortage of resources Psychological problem of sack is considered a key factor in the group of psychological factors To overcome this problem, the feasible solution is specifying weaknesses and current situations, and building obvious objectives for the measures for the system of recording costs at the unit The clear goals will reduce the concerns and the deep understanding of the current situation will become the motivation to overcome the difficulties The objectives will play a role as a landmark supporting the evaluation of the implementation The results of working and the small objectives will help participants reduce the pressure on the problems related to capacity assessment and the sack The table 5.1 illustrates the current situation and goals in coming future aimed t helping reducing the psychological pressure Psychological problem that it is hard to implement following theory can be solved by classify objects for ABC theory transmit People in the unit can be divided into four main groups related to new cost allocation implementation, including: leaders and impact people, quickly receptive people, slowly receptive people and conservative people Each group can use different methods to propagate and remove stress Stating objectives, benefits and clear way of implementation for their imagination will decline anxiety and increase interest of reception In addition, different groups with different impact frequency and ways will affects much on removing psychological obstacle of ABC method Psychological problem of being worried about data processing with huge amount can be solved by subdividing data entry works Data entry subdividing and processing need the combination of departments Functional departments with their data can support to enter and process data together with group of implementation On that basis, data will be entered more quickly and accuracy because departments understand related data and not put pressure on some other groups This helps to decline pressure of data entry psychology and encourage individuals to implement together For psychology of admitting lack of resources before implementation, it is necessary to clarify objectives and methods suitable for the unit Psychology of admitting lack of resources starts from people who does not really understand objectives and steps of implementation If the project has objectives and way of implementation in detail, these people may rethink how to achieve objectives with the fewest resources When understanding the way and objectives, this psychology will be removed and encourage creativity to have the best way of implementation In conclusion, psychological problem will prevent much in process of implementation In order to overcome this problem, objectives need to be particularized to recognize milestones for comparison Specific description of instruction also helps to decline psychology of being afraid Creativity solutions should be encouraged to attract participation to decrease psychological pressure when implementing 5.2.3 Problem of choosing ABC related strategy According to conception of modern business, current business environment has no limitation but a flat world with many variations from scientific-technological development In order to exist, companies need to 20 develop their competitiveness advantage, build strategy of new product and market development To develop competitiveness advantage, companies need to review intrinsic factors which contribute to the success of companies It is not easy to see these factors Administrative tools to identify competitiveness advantage and choose strategic direction are not concerned by managers One of intrinsic factor identifying tools, SWOT, is not promoted effectively If this tool is combined with game theory and presented with choices to promote maximal internal factors, information demand for decision will boost companies to use ABC to control resources better for maintenance of competitiveness advantage Therefore, it is necessary to have a new view of administrative tools and their combination to create characteristics in order to build competitiveness advantage that companies need for their existence and development For problem of new product and market currently, many companies find difficulty in identifying new product and orienting market They can study and apply administrative tools such as Boston matrix, Ansoff matrix and Sandcone analysis Ansoff matrix helps companies analyses manufacturing products This matrix helps companies predetermine whether the products need enter market, develop or the market need diversify or expand Then leaders make appropriate decision for each product investment Boston matrix helps companies review markets which they are following If products are in star location, market share is growing and need to be invested and developed If products are in question mark, market share is narrow though it is expanding Products with large market share but no growing, products are in dairy cow location If market share are recessed, products are in dog location Sancone analysis helps managers make decision of focusing on product – service quality, customer’s belief, order processing speed or cost decreasing In conclusion, to choose appropriate business strategy, companies must consider intrinsic factors which strengthened them In addition to administrative tools which need renewing and combining with other tools to make difference, ABC method will help managers control existing cost and resources well 5.2.4 Other related recommendations to support for ABC application in enterprises Training and couching factor in research result does not affect as much as three above factors, however appropriate solution to this factor also helps to decrease impact of the above factors If training and couching issue is solved well, limitation of implementation technique, awareness limitation or psychological stress will reduce Training issue can be carried out in various directions For example, ABC method is introduced in universities as a new cost valuation, professional associations of accounting, auditing update new knowledge for members Such associations are where to exchange implementation experience, gradual generalization of knowledge and implementation way for members For enterprises, in order to quickly carry out ABC method without technical limitation, they may actively develop training plan with a special subject of this method The special subject need discussing in advance with consultants about present situation of the enterprise to give a suitable training program Training courses should focus on important objects such as accounting department, managers to create background for ABC development Related to training and couching issue, when tested model gives initial result, next concern will be experience transfer to the entire company In order to this, implementation steps should be recognized, calculation and procedure forms should also be standardized It is necessary to build operational dictionary to identify main activities and procedures in the company Procedure standardization may need consultancy of experts of experienced staff Therefore, for ABC existence and development in the company, the concerned issue is popular training of ABC for the whole staff in the spirit of cost recognition of arisen objects Awareness limitation of ABC can change by changing view of accounting information system Currently, awareness of accounting biases to financial accounting Managers still think that accounting has only target of serving tax statement and auditing They have not really understood that accounting is an arithmetical language which can help to provide information of company activities usefully Underlying cause is that regulatory accounting system which has been much complication and accounting principles have many unclear points Besides, managers rely on experience rather than statistics and data to make decision, which leads to disadvantages of current accounting system In order to remove restrictions on current accounting, promoting conditions are needed to change view of accounting and to be premise of ABC Circular 200/2014/TT-BTC on 22 December 2014 is a very important premise which remove psychology of regulatory-directed accounting The spirit of this circular allows companies to recognize accounting information by themselves on the basis of unobligated general instruction, with the most suitable recognition way for their activities Therefore, companies can reorganize their accounting information system so that it is the most appropriate for the leadership and conformed to instructed standards The system are not compulsory to comply regulatory of tax as long as it reflects exactly economic content of the company Thus, external condition (Circular 200/2014/TT21 BTC) and intrinsic condition (accounting information in the company) are ready, companies need to gradually apply ABC information to make decision To that, accounting department has to persuade the managers with real benefits of ABC Information from tested model is compared with traditional method to be the basis of decision Based in initial results, this method will gradually actualize and expand application In order to increase persuasiveness of ABC benefits to enlist the support of leadership, accountants should themselves build a cost and profit analysis system for each activity, each customer, and each market based on ABC When managers see useful information to make decision, they will change awareness of this method and require ABC information as an essential part of management information According to Brent (2012) and Douglas (2013), ABC application in enterprises are totally possible, and they developed the easiest procedure of implementation for enterprises They supposes it just need to understand ABC philosophy that cost of product or customer should be allocated for them the most appropriate According to Douglas (2013, to overcome problem of budget lack, implementing this new method does not need much cost The most important thing is way of approach Enterprises can use Excel spreadsheets, develop the procedure of ABC simply but accurately in order to minimize the cost of analysis, data collection, training and consultancy This will reduce the anxiety of managers about restriction of implementing budget Depending on management style, available condition or staff’s qualification in the accounting department, implementation plans will be different Moreover, the implementation may not be perfect initially, but can improve continuously when support conditions change Importantly, information is built towards reasonable cost allocation for resource users In conclusion, if training and coaching is focused to be solved from various directions such as companies, associations, universities, etc., knowledge of ABC will be popularized and contribute to decline other factors’ impact In addition, accountants also have to persuade the managers about benefits of this new method based on various information for making decision with benefits This will contribute to actualize ABC in enterprises the most specifically 5.3 Limitations and recommendations for next researches Researches on activity-based costing are currently expanded in many countries Theoretical researches all prove this method can help enterprises with competitiveness advantage, better control of cost and management ability increase Although this research is inspected to be relatively appropriate and shows several factors restricting ABC application in enterprises, it is just a piece of ABC research in Vietnam and there should be more related researches According to Turney (2010), research of ABC is not only applied but also used with information for entire management and strategy planning for companies And the recent trend shows that after applying ABC method, research which directs to combine this method with other models such as TOC, EVA, BSC, TQM, JIT is also direction of recent application research In addition, using ABC to evaluate operational result through ROI criteria (Return on Investment – ROI), which is used to consider efficiency of ABC application, is needed to study in Vietnam Another trend of ABC application research is transfer to improvement research with TDABC version (Time Driven Activity Based Costing – TDABC), which uses time criteria as allocation basis, to make model smaller in some cases This problem needs to be researched for Vietnamese companies Another direction of ABC-related application research is combination of estimating model for enterprises (Activity – Based Budget – ABB) This model analyzes activities and costs to be the basis of exact information providing when the estimation is established This decreases error significantly to increase the reliability of estimation when relaying on necessary activities to achieve objectives In addition, this research is carried out with a small number of samples represented for companies, it is possible for next researches to expand sample and carry out again in order to respect variables which are established on recommended research model This can bring more general result and help to discover other factors which are not established Samples can be other objects such as the whole company in any scale, or state companies, foreign direct investment company or a business field of apparel, logistics, etc in order to find out impact variables in special fields Diversified samples helps to inspect and add more factors to complete the model This will increase research experience and simpler implementation of ABC Another direction is practical application in some companies to assess whether theoretical model like this research recommendation really need to add new factors that the thesis has not mentioned Research of real situation in each company will help actualize theory and make theory of this method exist and develop 22 Thesis-related publications [1] Activity-based costing application in seaport service, case study in Tan Cang – Cai Mep International Company Limited, 2016 Accounting & Auditing Review, No 3, page – 29 [2] Study on assessment model of ABC application limitation in Vietnam’s enterprises, 2016 Vietnamese Accounting and Auditing Yearbook – 20 years in Reformation and Integration, page 317 – 322 [3] Factors of preventing activity-based costing application in small and medium enterprises of Vietnam, 2016 Journal of Science of University of Finance and Accounting, No 6, page 68 – 74  ... Background theory related to the thesis content In order to be the basis for arguments of theories and hypotheses as well as variables constructed for theoretical models, some background theories... practice of Vietnam Besides, studies on factors which prevents new method application in Vietnam’s enterprises systematically is limited This is the gap of knowledge about ABC in Vietnam Summary... contributions in theory and practice: The thesis proves that there are nine factors impacting negatively on ABC application in Vietnam’s enterprises In addition to contribution to theory, this thesis