The Research On Application Of Activity-based Costing In M Bank

In the environment of economic globalization, financial integration and opened to foreignfinancial, the number of institutions and asset size of foreign banks in China is increasing. According toPricewaterhouseCoopers recently released report shows that, as of the end of2011, the foreign banks’ assetsize reached2.15trillion and the total profit reached$16.73billion. China’s commercial banks have theadvantages of outlets intensive distributions and original customer trust; foreign banks will not have muchimpact on the domestic commercial banks in the short term. However, with e-commerce technologydeveloped and domestic customers understanding and acceptance of the foreign banks; foreign banks willbe serious challenge for domestic commercial banks in the medium or long term. Meanwhile, People’sBank of China has adjusted the floating range of deposit and loan, which led to the reducing of banks’ netinterest margin. This measure makes a drastic effect on bank profitability, and Non-interest income becomemore important to bank. China’s commercial banks should continue to conduct business innovation, payattention to internal management and reduce operating costs, in order to remain invincible in the fiercecompetition.Bank’s operating performance is reflected not only in the scale of capital assets, but also reflectsthe size, quality and efficiency, the scale of the development does not necessarily bring a correspondingimprovement of quality and efficiency. For a long time, banks of China pay attention to the scale ofbusiness and ignore the internal management. The traditional cost accounting methods used by thecommercial banks of China, which lack of management accounting measures, cost accounting extensive,and always ignore the opportunity costs and hidden costs. The Costing method of China’s commercial banks can not provide decision-useful information in a timely and accurate; it is difficult to meet the needsof the development of new financial situation, leading to the low economic efficiency situation. Theactivity-based costing method is able to solve the problems of traditional cost accounting method, and meetthe requirements of the Bank’s future strategic management; it combined cost drivers with resources andactivity, providing timely and accurate cost information, raising the efficiency of the value-added activities,eliminating the non-value added activities, as a result achieving the accuracy management. China’scommercial banks should be implement the operating cost management.Both theory and empirical analysis are used in this paper, combining the basic theory andpractical case, to illustrate the advantage of activity-based costing method applied to the commercial banks.The first part introduces China’s commercial banks face to the competitive environment and thesignificance of the implementation of activity-based costing, a review of the research status at home andabroad, proposed framework arrangements and innovation of the article. The second part introduces thebasic principle of activity-based costing and related concepts, and compared the traditional costing withactivity-based costing.，highlight the advantage of activity-based costing. The third part, an illustrativeexample is given to show of the method. M bank is the object of the study, analysis of the necessity andfeasibility of its management and the implementation of operating cost method. In the fourth part of thepaper, according to the survey data, detailed design the program that the operation of activity based costingmethod. The main content of the fifth part is a forecast the activity-based costing method used in theprospects of China’s commercial banks, and put forward some suggestions for the activity-based costingimplanted in China.