Open-Book Accounting

INTRODUCTION In the present challenging business environment both public and private organization are progressively required to deliver better value for money. This is not a simple task especially when it involves the high-risk business of delivering complex projects to meet intense target on time, cost and quality. Moreover, partnering has become an important part of the project that an organization used to achieve the goal of the organization and created better value of money. To be able to compete in business environment many organization focused on their core competencies. In order to enhance the strategy, firms are increasingly outsourcing the non-core activities in order to gain competitive advantage by focusing scarce resources on

Open-book accounting (OBA) is the practice where internal cost information and other related information is shared with another firm, was established as an opportunity for firms to extend their collaboration to the field of management accounting. More so, Suomala (2010) explained that OBA was an accounting template with a seemingly flexible character. Open-book accounting could be used in price management and for inter organizational cost management according to Hoffjan et al (2011). This includes increasing negotiation pressure on a supplier. Xu (2011) analyzed IOCM (inter –organizational cost management) circumstance, techniques, and constructed an application framework of cost management in supply chain. He also stated that Open book accounting (OBA) is a strategy that leads towards co-operation between firms situated in a supply chain. Cost management practices increasingly transcend traditional firm boundaries (Mouritsen et al., 2001; Dekker, 2003; Cooper & Slagmulder, 2004) and OBA is still a new phenomenon. The main reason is that cost data is usually one of the most confidential and sensitive pieces of information in companies. According to the author of the article given OBA consist of three dimension: (1) the direction of the information exchange, (2) the degree and quality of the disclosure, and (3) the boundaries to

Through the sharing and use of information and other resources, the objective is to reduce costs in the value chain, as well as to enhance the strategic position of all organizations involved. IOCM's objective is to identify and realize lower-cost solutions by means of coordinated actions by buyers and suppliers than would be possible through independent cost management by the exchange partners. In contrast, OBA involves the exchange and/or disclosure of cost-relevant data to the partner firm. Therefore, the degree and quality of cost-data disclosure differ widely. OBA is frequently used by management accountants, not only for cost-data disclosure, but also for the exchange of cost-relevant information, such as sales forecasts (Mouritsen et al, 2001). Similarly, OBA may refer to the disclosure of relatively unspecific cost data, as well as to the direct, unmodified disclosure of detailed cost data from the internal accounting system (Axelsson et al, 2002). According to Cooper and Slagmulder, 1999 IOCM offers three opportunities for reducing costs: during product development, during product manufacturing, and at the buyer–supplier interface