From the early 1980s, calls have been made for management accounting to undergo changes that considerably exceed the transformations witnessed in the field over the last seventy years. Among the many novel cost management techniques, activity-based costing (ABC) has received by far the most attention. ABC entails the examination of activities across the entire chain of value-adding organizational processes underlying causes (drivers) of cost. It attempts to overcome cost distortions by addressing cost behaviour parameters, which include non-volume cost drivers reflective of production complexity and product diversity in addition to volume-linked drivers of cost. Although one output of ABC calculations is costs based on resource consumption, the actual process of deriving such costs offers a number of monitors which may be useful for a variety of managerial purposes. These include novel performance measures, altered budgeting techniques and a large amount of decision-making information tied to the broader concept of activity-based management.

Prior to the 1980s, some accounting commentators articulated certain of the broad principles which underpin ABC (for a good discussion, see Bromwich and Wang 1993). However, the literature relating to this accounting approach has developed and illustrated its potential primarily since the late 1980s. Partly, this may have been linked to the efforts of the major proponents of ABC and the support of consultants and other distinguished accounting scholars who promoted the technique during the late 1980s and 1990s. The routes for extolling ABC's virtues have been varied and the reception it has been given by accounting academics, practitioners and industry has been significant, especially when compared with that given to other new techniques. There is now much evidence to show that major enterprises across the Western world have begun to exploit ABC's offerings (see Bhimani 1996). This is being done, by all accounts, in a seemingly irreversible manner. Yet it is also true that many organizations - which for a number of years have acknowledged the necessity of investing in accounting resources that reflect the ideas encompassed by ABC - show little evidence of taking action along these lines. The question remains as to why such a seemingly rational accounting technique has failed to gain total and unreserved allegiance from firms which it would seem likely to benefit.