Defining Reporting Dimensions
Multitude of these legal and operational structures clubbed with accounting and reporting needs give rise to many reporting dimensions at which the organization may want to track or report its operational metrics and financial results. This is where business dimensions play a vital role.
Multitude of these legal and operational structures clubbed with accounting and reporting needs give rise to many reporting dimensions at which the organization may want to track or report its operational metrics and financial results. This is where business dimensions play a vital role.
Business Dimensions:
A dimension reflects the attributes of a business, such as legal structure, management structure, departments and projects. Dimensions are used to help capture and analyze underlying data and when used with reporting provides an effective tool to break down key components of business to help make better business decisions. Business dimensions describe the business-specific objects within the model, such as products, customers, regions, employees, and so on.
Why we need business dimensions:
In any typical entity, accounting process starts with recording of a transaction that has a financial implication on a voucher and it culminates with the preparation of final books of accounts. However this simple process gains complexity when the size of the organization and diversity of its environment increases. For example: Global companies regularly distribute goods from a central site to customers located in different countries or regions. Before shipping lo a customer, goods may be processed through a separate operating unit or subsidiary in the country of sales origin. A complex sequence of coupled accounting records is needed because these transactions impact multiple organizations and legal entities, and most governments require a financial record for transactions conducted between legal entities. Management need to contemplate these business dimensions properly for decision-making and enhancing the achievement of the competitive advantage and control over the operations of the enterprise.
- There exist various types of entities or business units which are part of the same global group.
- These units may represent countries, locations, businesses, functions, projects, cost centers, segments etc.
- These units may have different reporting needs.
- These units may be responsible for their own profit and loss.
- They might be holding their own Fixed Assets.
- They might be concerned with their own markets where their products are sold.
- They might be constituted as separate legal entities over multiple layers of ownership with their peculiar independent local statutory reporting needs.
- Subsidiaries and branches operating as individual entities need to be consolidated with the group financials.
Examples of different dimensions are:
- Legal Entity: Financial results and trial balance at each legal entity level
- Division/Department: Financial results and trial balance at each division or department
- Product Line: Operating margins for each product line
- Geography: Annual Growth for each geography in which a company operates
- Project: Cost and profitability for each project undertaken by business
- Cost Center: Costs accumulated and allocated through each cost center
- Accounts: Total fixed assets owned by the legal entity, accounted under land and building, furniture and fixtures and other accounts
- Functional Area: Total cost attributable to each function like finance, marketing etc.
These dimensions further have parent child relationships within themselves and other corporate relationships (known as Business Hierarchies) with other dimensions. Corporate relationships are the links between various dimensions like parent companies, subsidiaries, headquarters, branches, functions, product lines, cost centers etc. A dimension may consists of one or more hierarchies that can contain several levels.
Related Links
You May Also Like
-
Driving Business Efficiency through Divisions and Departments
In case of a multi-divisional organizational structure, there is one parent company, or head-office. And that parent owns smaller departments, under the same brand name. Dividing the firm, into several self-contained, autonomous units, provides the optimal level of centralization, in a company.
-
GL - Accrued / Unbilled Revenue
Accrued revenues (also called accrued assets) are revenues already earned but not yet paid by the customer or posted to the general ledger. Understand what we mean by the terms accrued revenue, accrued assets, and unbilled revenue. Explore the business conditions that require recognition of accrued revenue in the books of accounts and some industries where this practice is prevalent.
-
Explore the concept of journal reversals and understand the business scenarios in which users may need to reverse the accounting entries that have been already entered into the system. Understand the common sources of errors resulting in the reversal of entries and learn how to correct them. Discuss the reversal of adjustment entries and the reversal functionalities in ERPs.
-
Understand what we mean by GAAP to STAT adjustments. This article discusses the different standards that are used for multiple representations of the financial results for global organizations. Understand the meaning of US GAAP, Local GAAP, STAT, IFRS, and STAT. Finally, understand why accounting differences arise and how they are adjusted for different financial representations.
-
Global Business Services (GBS) Model
Global business services (GBS) is an integrated, scalable, and mature version of the shared services model. Global Business Services Model is a result of shared services maturing and evolving on a global scale. It is represented by the growth and maturity of the Shared services to better service the global corporations they support.
-
GL - Different Type of Journals
Two basic types of journals exist: general and special. In this article, the learner will understand the meaning of journalizing and the steps required to create a journal entry. This article will also discuss the types of journals and will help you understand general journals & special journals. In the end, we will explain the impact of automated ERPs on the Journalizing Process.
-
An organizational design is the process by which a company defines and manages elements of structure so that an organization can control the activities necessary to achieve its goals. Good organizational structure and design helps improve communication, increase productivity, and inspire innovation. Organizational structure is the formal system of task and activity relationships to clearly define how people coordinate their actions and use resources to achieve organizational goals.
-
There are five types of core accounts to capture any accounting transaction. Apart from these fundamental accounts, some other special-purpose accounts are used to ensure the integrity of financial transactions. Some examples of such accounts are clearing accounts, suspense accounts, contra accounts, and intercompany accounts. Understand the importance and usage of these accounts.
-
In this article, we will describe how to determine if an account needs adjustment entries due to the application of the matching concept. Learners will get a thorough understanding of the adjustment process and the nature of the adjustment entries. We will discuss the four types of adjustments resulting from unearned revenue, prepaid expenses, accrued expenses, and accrued revenue.
-
GL - Journal Posting and Balances
In this tutorial, we will explain what we mean by the posting process and what are the major differences between the posting process in the manual accounting system compared to the automated accounting systems and ERPs. This article also explains how posting also happens in subsidiary ledgers and subsequently that information is again posted to the general ledger.
