The Third Generation of the Performance-Based Activity-Based Accounting (PFABC) Approach and its Role in Evaluating Banking Performance - A Case Study in the Bank of Baghdad

Abstract

The research aims to review the conceptual development that the ABC approach has gone through through successive generations that moved from the principle of dividing the performance of the economic unit according to activities, and then moving to linking the performance of activities to the time it needs accurately to avoid wasting time. The latest development in the activity approach came under the name of the PFABC system to represent the point of connection for two systems: the activity-based costing system (ABC) and the activity-based management system (ABM), which links the determination of indirect costs on products and services, with measuring the performance of departments independently of each other and identifying deviations in the efficiency and effectiveness of production volume. In this research, cost accounting was employed based on performance-based activity for the purpose of evaluating the performance of one of the Iraqi private banks listed on the Iraq Stock Exchange, which is the Bank of Baghdad. The performance of the research sample bank was evaluated for the fiscal year 2023, and the information contained in the financial and administrative reports and the bank's various records were analyzed within the limits of the requirements of the nine proposed steps for operating PFABC.

The most important conclusion was reached, which is that the performance evaluation results for both the main activities and the supporting activities showed unfavorable deviations from the final evaluation that aimed to evaluate the productivity that was formed from the efficiency and effectiveness evaluations of the research sample bank. As for the most important recommendations, they emphasized the need to give utmost importance to the methods of evaluating its performance and abandoning traditional methods and keeping pace with the developments in management accounting techniques and the diversity of financial and non-financial indicators that enable it to reach results of the utmost accuracy and predictive value.