Budgeting Practices Of Listed Companies In The Netherlands – Coursework Example
Although budgeting is not a new concept, there have been numerous criticisms of traditional budgeting processes. Critics, through various articles, have claimed that traditional budgeting has more costs as compared to benefits (De With and Dijkman 26). They also argue that it inhibits innovation and changes. According to them, it causes unproductive behavior, and if there is any milestone achieved by an organization, then it is not because of budgets. The basis of the paper was, therefore, to investigate the budgeting procedures common among Dutch-listed companies. The aim was to have a comparison of the results with available accounting literature as pertains budgeting.
The research involved all the companies listed on the Amsterdam Stock Exchange. However, due to a different form of budgeting, there was an exclusion of investment and real estate companies. From the research, of all the firms under investigation, 63.6% had a claim that the current operational budget in the respective firms supported the firms’ strategy materially. A further 25% claimed that it supported the strategy to an even greater extent (De With and Dijkman 27). That showed consistency to accounting literature that links the operating budget to the firm’s strategy. According to the research, about 81.8% of the companies prepare yearly budgets and divide them into months while 18.2% divide their budgets into quarters.
Although most companies prepare budgets annually, there are others that make good use of rolling budgets. The results of the research indicated that the current budgeting practices that Dutch-listed companies practice were in line with what the available accounting literature state. From the research, there is an indication that the Chief Financial Officers of Dutch companies have great satisfaction in their budgeting practices (De With and Dijkman 35).
The main point that the article brings out is the conformity of Dutch-listed companies to what accounting literature has to say about budgeting. The article is thus important as it brings to light the budgeting practices of Dutch-listed companies. It relates these practices to existing accounting literature. The main points for discussion would be the budget period, budget targets and the uses of budgets.
De With, Elbert and Dijkman, Aagtje. Budgeting Practices of Listed Companies in the Netherlands. Management accounting Quarterly. 10.1 (2008): 26-36