Contemporary evolutions in costing methods: Understanding these trends through the use of equivalence methods in France

Abstract

At the beginning of the 1950s, the main costing methods used in France, including the so-called sections homogènes method, were subjected to a lot of criticism because of their excessive complexity. This opened the door to new equivalence methods that claimed to offer a solution to the problem. They were, however, supplanted by the simpler direct costing method that came into use in France in 1960s, and just about fell into oblivion. The economic situation at the end of the 1980s nevertheless rekindled interest in the allocation of indirect costs, including the Activity Based Costing (ABC) method. Setting up this method, however, presented problems that were similar to those of the sections homogènes method, thus favouring a rebirth of equivalence methods, to which Time Driven ABC (TDABC), which appeared in 2005, can be linked. In this article we retrace this history, combining economic factors and the determinism inherent in the technique, in order to examine how methods of costing have evolved with regard to relative complexity.