...T OPIC SEVEN Other AIS Development Approaches © 2012 UMT Advanced Accounting Information Systems 1 INTRODUCTION • We’ll also discuss how to hasten or improve the development process through: – Business process reengineering – Prototyping – Computer-aided software engineering (CASE) tools © 2012 UMT Advanced Accounting Information Systems 2 BUSINESS PROCESS REENGINEERING • Business process reengineering (BPR) is the analysis and redesign of business processes and information systems to achieve significant performance improvements. – Reduces a company to its essential business processes. – Reshapes organizational work practices and information flows to take advantage of technological advancements. © 2012 UMT Advanced Accounting Information Systems 3 BUSINESS PROCESS REENGINEERING • BPR: – Simplifies the system. – Makes it more effective. – Improves a company’s quality and service. • BPR software has been developed to help automate many BPR tasks. © 2012 UMT Advanced Accounting Information Systems 4 BUSINESS PROCESS REENGINEERING • Michael Hammer has set forth several principles that help organizations successfully reengineer business processes: - Organize around outcomes, not tasks. • DO AWAY WITH: Assigning different parts of a business process to different people, with the resulting handoffs, delays, and errors. INSTEAD: Each person’s job is designed around an objective, outcome, or process rather than a task needed to...
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...Automated Process of Accounting Information Systems Submitted on behalf of Team C ACC/542 March 17, 2015 Professor Tomas Hernandez The acquisition of accounting information systems is by far one of the most significant choices that a business must consider. Before a company chooses to purchase industry-specific software or develop custom software it must first evaluate the rationale, needs of the system, and the value that the software will add to the accounting operations. After careful consideration, our firm concluded that the best course of action is for Kudler Fine Foods to purchase industry-specific software. The core focus of the company is not software development nor should it be, management needs to use resources for growing the company. As a food company, management will lack knowledge to hire the correct type of development resources. The company will need contract developers as well as some hours of an architect to design the system; this can become costly. Developing cost is expensive and if the company is halfway through development of the software and the funds run out, the company will have to put resources in to finish the program since half a program is useless, development cost typically run three times more than planned. Technical recourses have a hard time understanding business requirements outside their domain, so it can be hard for developers to understand exactly what accounting wants and needs since they are more technical and does not understand...
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...Microsoft’s Financial Reporting Strategy Objective • Understanding financial reporting strategy of selecting conservative accounting policies • Discuss controversial accounting issue in the software industry—software capitalization and revenue recognition • Discuss various incentives that motivate managers to select one accounting method over another • Learn how to use accounting analysis method to better reflect economic reality Microsoft’s Financial Reporting Strategy Introduction • Phenomenal financial success over the past years Founded in 1975 by Bill Gates and Paul Allen Went public in 1986 at $25.75 per share. Revenue and operating income grew an average of 43% and 49% per year. Stable growth in stock price ( Exhibit 5 ) Report higher than expected financial performance Asset totaling $37 billion,book value of equity equal to $28 billion and market value about $460 billion on June 30,1999. Microsoft’s Financial Reporting Strategy Introduction • Conservative accounting policies GAAP allow managerial discretion in accounting policies In two key areas, Microsoft choose a rather conservative method of reporting (1) Software development costs (2) Revenue recognition Microsoft’s Financial Reporting Strategy Software development costs • FASB’s guideline (SFAS NO.86) Require capitalization once technological feasibility has been established. • Microsoft’s policy Expensed as incurred FASB’s guideline does not materially affect the company • Note From 1986 to 1999...
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...Strategy Financial Accounting: This case introduces two controversial financial accounting topics that arise in the software industry: revenue recognition and the capitalization of software development costs. Financial Accounting from a management perspective: With respect to revenue recognition, Microsoft argues that it will provide additional services throughout the life of the software it is selling, so it should defer revenue recognition on a part of the sale price. With respect to software development costs, accounting rules give companies wide latitude as to what they can capitalize. Microsoft chooses to expense almost all software development costs, so for both revenue recognition and capitalization, Microsoft appears to choose very conservative accounting policies. However, Microsoft also changed its revenue recognition policies to increase revenues, presumably during a period when revenue growth was less than expected. Sometimes financial statement users think of conservative accounting policies as less controversial than aggressively liberal accounting policies. However, this case illustrates that either accounting policy makes it more difficult to compare firms with companies that choose middle-of-the-road accounting methods. The case also highlights the relationship between managers, analysts, and capital markets. It also illustrates the role financial accounting plays in these interactions. Cost accounting and managerial accounting: None. Question 1...
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...Accounting is not the same as it used to be. Advancements in information technology have transformed the accounting process and the ways in which accountants undertake their roles. Bookkeeping, calculations and data storage that were previously maintained on paper are now all processed on computers through the use of accounting information systems. It is a known fact that accounting is influenced by external factors such as the economy, laws and society and it must persist to remain current with all the factors that affect the accounting process to maintain its effectiveness. Society has had a great influence over the accounting process, so much so, that a notion stating some information regarding the internal workings of a company should be made available to the public, forced the mandatory disclosure of a company’s financial information to its stakeholders as well as the public. Society has also influenced accounting in a more indirect manner. This can be illustrated by how the societal push towards a more environmentally aware culture forced new regulations and standards such as ISO 14001 (International Organization For Standards, 2010) to be established to reflect this perceptional change, which in turn indirectly created compulsory costs for a company pertaining to the promotion of environmental sustainability. Companies are now obligated to offset their pollution levels and any harmful bearings their corporate activities cause to the environment, as well as...
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...Asset Policy 1. General Information Overview A business entity is supposed to maintain updated records for property, plant and equipment. In addition, these assets should be capitalized and depreciated in accordance regulations in existence. After capitalizing the cost of an asset, it is systematically depreciated over its useful life. Purpose The aim of this policy is to establish a set of guidelines that will be used to collect information needed for proper asset cost capitalization. These guidelines will apply consistently for asset capitalization and depreciation in a manner that is consistent with the objectives of a business organization’s objectives. The guidelines will also show how to deal with the matter in accordance with the Generally Accepted Accounting Principles (GAAP). Scope The scope of this policy includes any assets categorized as property, plant and equipment. It also covers furniture and fixtures, computer software and hardware, leaseholds or capital improvements. The policy is meant for use by all business entities across board and overturns other policies on Fixed Asset reporting issued in the past. 2. Improvements on Leasehold property The cost of any leasehold improvements that are capitalized includes those related to renovations, improvement or structural alteration made by a lessee. However, incentives such as tenant allowances, contributions made by landlords and others should not be capitalized. These are usually...
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...earnings growth in the future which determines the company’s market value. Notice also that the company’s choice of conservative accounting policies has the effect of depressing the company’s book value of equity. 2. What effect did Microsoft’s software capitalization policy have on its financial statements? Ignore any potential tax effects. a. Assume that 60% of Microsoft’s research and development expenses were incurred after technological feasibility was established, that the average product life was two years, and that the company begins amortizing software costs at the beginning of the following year. Estimate the effect of capitalizing software costs on Microsoft’s fiscal 1997, 1998, and 1999 income statements and balance sheets. 1995 1996 1997 1998 1999 R&D recognized on the I/S 860 1,326 1,863 2,601 2,970 These are the adjustments to 516 258 0 capitalize 60% of the R&D expense 796 398 0 every year and to amortize it with 1,118 559 0 SL in 2 years 1,561 780 1,782 Capitalized Development Costs EB 516 1,054 1,516 2,120 2,562 Amortization expense 656 957 1,339 Development costs expensed (60% of R&D) 1,118 1,561 1,782 Reduction in profit b/c of expensing Develop. -462 -604 -443 As a % of reported profit before taxes -8.70% -8.50% -3.70% b. Why do you think Microsoft chose to expense all software costs as incurred rather than capitalizing a portion of these costs? Remember that the FASB...
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...as of December 31, 20XX and the related statements of income, retained earnings, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. The major audit issue involved will be determining that the client has properly categorized costs between research and development (those costs involved in establishing technological feasibility) and those costs that should be capitalized. The auditors will have to determine at what point the software product reached the point of technological feasibility. We conducted our audit in accordance with auditing standards generally accepted in (the country where the report is issued). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Furthermore, our ratio analysis showed no major changes. However, our audit did reveal that a number of the ratios show significant changes which seem due primarily to the increased level...
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...leader in consulting, technology and outsourcing with revenues of US$ 6.994 billion (FY12). Many of the world’s most successful organizations rely on Infosys to deliver measurable business value. Infosys provides business consulting, technology, engineering and outsourcing services to help clients in over 30 countries build tomorrow’s enterprise. 3. MindTree: MindTree was started in August 1999 by a diverse team of 10 professionals who came from three different nations and had already scripted successful careers. Mindtree provides IT services and Product Engineering services to leading global organizations with revenues of $284 million (FY12). IT Industry Overview The Indian IT Industry’s services sector has evolved from application development and maintenance services to full service players...
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...Management Accounting Software: Boon or Bane A Term Paper Presented to Dr. Josephine Magbojos CEAS, English Department In partial Fulfillment of the Requirements for Comski2 2014 by Briones, Kristine Norien Resma, Maria Angelica F. Abstract The development of technology brought many changes in the accounting world and the development of accounting software is one of its biggest contributions. Accounting softwares are beneficial for a business and a company for it to produce a financial report faster and easier. The use of different programs for the calculations and reporting made its way to no more manual accounting which is more complicated to do. To maximize the benefits of its uses the advantages and disadvantages of these softwares must be identify before using it. Hence, with proper knowledge of its positive and negative effect, a business or an auditing firm will be able to properly utilize its functions that will then produce financial reports which are essential to the company’s economic decision making. Technology has been an integral part of everyone’s daily lives. Different machineries, gadgets, softwares, and equipment have changed the ways of living of the Filipinos. These things ease the job of a worker, helps a student do home works and research faster, and a mother do household chores. Many developed softwares that are useful for the management of the organization. Like softwares that can improve the production of a product, softwares that help...
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...earnings growth in the future which determines the company’s market value. Notice also that the company’s choice of conservative accounting policies has the effect of depressing the company’s book value of equity. 2. What effect did Microsoft’s software capitalization policy have on its financial statements? Ignore any potential tax effects. a. Assume that 60% of Microsoft’s research and development expenses were incurred after technological feasibility was established, that the average product life was two years, and that the company begins amortizing software costs at the beginning of the following year. Estimate the effect of capitalizing software costs on Microsoft’s fiscal 1997, 1998, and 1999 income statements and balance sheets. [pic] b. Why do you think Microsoft chose to expense all software costs as incurred rather than capitalizing a portion of these costs? Remember that the FASB provides explicit guidelines for the treatment of software development costs that required capitalization once technological feasibility was established. Microsoft’s determination that the standard did not “materially affect the Company” likely rested on one of two lines of reasoning. First, the point at which the company determined the technological feasibility of their products may have been sufficiently late in the development process as to make...
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...criterion of measurability would require that a resource not be recognized as an asset for accounting purposes unless at the time it is acquired or developed its future economic benefits can be identified and objectively measured. 45. Paragraphs 39-40 indicate that at the time most research and development costs are incurred the future benefits are at best uncertain. In other words, there is no indication that an economic resource has been created. Moreover, even if at some point in the progress of an individual research and development project the expectation of future benefits becomes sufficiently high to indicate that an economic resource has been created, the question remains whether that resource should be recognized as an asset for financial accounting purposes. Although future benefits from a particular research and development project may be foreseen, they generally cannot be measured with a reasonable degree of certainty…Research and development costs therefore fail to satisfy the suggested measurability test for accounting recognition as an asset. In other words, thinking about the capitalization of software development in regards to SFAS No. 2 and measurability, these costs should not be capitalized. However, I will say this in the defense of capitalizing, we can measure the value of a property at the time of purchase and currently we record these assets at historic cost. However, if there is a large drop in the market, a company will not recognize this change...
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...1. This question addresses the effect of Microsoft’s software capitalization policy on its financial statements. Ignore any potential tax effects. Estimate the effect of capitalizing software costs on Microsoft’s fiscal 1997, 1998, and 1999 income statements and balance sheets. Assume that 1) 60% of Microsoft’s research and development expenses were incurred after technological feasibility was established, 2) the average product life was two years, 3) the company had always capitalized these costs; and 4) the company begins amortization capitalized software costs at the beginning of the following fiscal year. Briefly speculate as to why Microsoft chose to expense all software costs as incurred rather than capitalizing a portion of these costs. Answer: Microsoft chose to expense instead of capitalizing portion of all software costs incurred in spite of the fact that FASB guidelines require treatment of software development costs to be capitalized once technological feasibility was established. The reasoning could be the following: By the time the company determined the technological feasibility of their products may be so late in the development process that the amount of software costs eligible for capitalization are too small. The useful life of the product can be so short-lived that expensing costs as incurred can mostly be equivalent to capitalization 2. What impact did the company’s decision to adopt its new revenue recognition policy in 1996 have on the company’s...
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...------------------------------------------------- 4 ------------------------------------------------- 4 6. ------------------------------------------------- * Essay length: 1296 words * Submitted: 05/04/2012 Save View my saved essays Submit similar essay Share this essay: * * * Do not show me this again Are you in the right place? Jump to Accounting and Finance and see how teachers think you should prepare in: * GCSE 248 * AS and A-level 200 * International Baccalaureate 310 * University 1,129 University Degree Accounting An extract from this essay... 1. What are the factors that likely explain the difference between Microsoft's market value of equity and its reported book value of equity? Microsoft's market value of equity is notably different from its reported book value of equity for two aspects of reasons. First of all, Microsoft's software capitalization policy and revenue recognition policy make it have a lower reported book value of equity. Microsoft expensed all incurred research and development costs in which some should have been capitalized. This accounting treatment resulted in lower earnings, lower retained earnings and lower book value of equity. Meanwhile, in 1996 Microsoft began recognizing 20% of revenues from Windows operating systems over the products life-cycle rather than recognizing it at the point of sale. This helped provide a 298% increase in unearned...
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...effected further adjustments to reclassify some of that amount from an asset to an expense. The issue of accounting for intangible assets has expanded in several directions. One of these directions concerns branded products. Some firms claim that the establishment of brands creates an intangible value for a company, and that such value should be able to be amortized for tax purposes. In turn, some auditors (both private and governmental) contend that the value of a brand is a form of goodwill, and as such may not be amortized and deducted from income taxes. In the traditional conception of goodwill, the claim is that a brand has no recordable value until it is sold, and that when it is sold it reflects goodwill that is neither amortizable nor tax deductible. Many firms contend, however, that brands have a current and intangible value. Thus, it is also within the realm of possibility that GEC Ltd. judged that some brand owned by AEI Ltd. possessed an intangible value that could be amortized and deducted. Accounting For Research and Development All research and development costs not directly reimbursable by others generally should be charged to expense when incurred. Business enterprises engaged in the development of computer software, however, question the inclusion or exclusion of the development of various types of computer software within the definition of research and development. The contention is that because...
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