The accounting literature differentiates between key
functions of budgeting, such as planning, control, and evaluation, and mostly assumes
that firms carry out an annual budgeting exercise. The purpose of this paper is
to explore how an institutionalised practice, such as budgeting, changes and to
examine the implications of such change for the functions of budgeting. We conduct
a field study of five industrial companies that recently either abandoned their
annual budgeting system or radically simplified it. Our findings suggest that
although new management accounting tools replace the budgeting system, the
planning, control, and evaluation functions remain. We observe two approaches
for the emerging practice of Beyond Budgeting. In the first approach, firms
differentiate between target setting and forecasting. This differentiation appears
to be a driver for budget abandonment. In the second approach, target setting and
forecasting remain interlinked and many characteristics of traditional annual budgeting
remain, albeit in a simplified form.