With the above background, let me get into ‘Segmental Reporting’ – a very common area (even without IFRS!). At the outset, it is good to note that IAS 14 deals with this subject and  AS17 – is the corresponding Indian Accounting Standard already  in force for certain companies.  Also, much to the relief of  ‘Accountants’ broadly there are no major variances between IAS14 and AS17 –  On the lighter side, feel – if one reads through the accounting standards – hardly 10% will be understood in the first few readings! (10 times taxing to first understand and xx??[God knows how many?] Times for implementation!!). However at the end, there is a larger intent to analyze financials to proactively assess if the health or intended moves of an enterprise are in the right direction adding investor value.

Now here is what IAS14 mandates – Looks pretty simple, till one has to implement!

• An entity reports information for ‘Business Segments’ and for ‘Geographical Segments’, indicating the types of products and services included in each reported business segment and the composition of each reported geographical segment. (One of these segments will be ‘Primary’ and the other ‘Secondary’)

• A set of reporting requirements – listed below for ‘Primary’ / ‘Secondary’ Segments so identified.

Already panting? Ok! Understand – here are a few breathers:

• Standard (mercifully!) applies only to entities whose shares are listed in Stock Exchange(s) or which are in the process of issuing the same for eventual listing:

• Don’t be overjoyed!! – Indian Accounting Standard is much more extensive in its coverage as it prescribes some additional class of companies or criteria for coverage (Ex. Banks and Insurance Companies, Entities having a Turnover of more than Rs. 50 Crores – (Approx. $10 Million). Borrowings in excess of Rs. 10 Crores (Approx. $2 Million), Holding / Subsidiary of any of the companies covered by AS17.

• Disclosure requirements arise only when the segment revenues earned from external customers are in excess of the prescribed threshold limit of 10% of the Total Revenue (Both internal and external).  – A minimum of 75% of the total revenue should be covered by segment reporting failing which additional segmental classification needs to be included until this limit is met!

I can already hear a few loud voices – how to identify ‘Business Segments’ or ‘Geographical Segment’ –

• IAS14 in my view lacks clarity [“The source and nature of the entity’s risks and rates of return determine whether the primary reporting format is business segments or geographical segments. This is usually identified by the entity’s internal organizational and management structure and its system of internal financial reporting to senior management.]

• AS17  provides some more guidelines for ‘Business’ classification based on Nature of Products and Services, Production Process, Type of Customers, Distribution Channels, Regulatory Environment  and for ‘Geography’ based on Similarity of Economic and Political Conditions, Relationship between Geographies, Proximity, Specific risks associated with a Region, Exchange control regulations etc.,

I am aware that this article has probably crossed reasonable limits. However, all the erudite readers will be quick to realize:

1. Aspects related to classification of ‘Business’ / ‘Geography’ segments (and possibly additional segments!), how to deal with financial elements that can’t be directly ascribed to specific segments (what kind of allocation rules etc., can be logically followed)   are all matters which are internal to any organization in which Professional Audit and Accounting Firms   are best positioned to assist in formulation of proper accounting framework for transition and then to ongoing compliance.
2. IT Service providers like Sierra Atlantic Inc., – on the other hand can consider the inputs for ongoing compliance arrived in Step 1 , evaluate gaps in the existing ‘Enterprise Applications’  configurations and come up with a sequence of steps for best possible fulfillment – i.e.:

• Upgrade to Release 12 Vs Re implement – Examine the flexible ‘Sub Ledger Accounting’ [SLA’ framework provided], other options [Ex. Multiple transaction types, Capturing mandatory additional information during transactions, organization structuring etc.]

Hopefully, readers now see the difference that I briefly dwelt upon in my first dialogue on the subject!  Before I conclude, here is another  compliance rider of IAS14  – Once a segment is reportable, in the next year even if it goes below the threshold limit it continues to be reported  and likewise if you have new reportable segment information that emerges in one year then you better provide previous year comparison as well !! – Accountants always on the receiving side! Icing on the cake, I suppose??

By for now, and hope to be back soon with insights into yet another topic.

]]> http://blogs.sierraatlantic.com/2010/11/ifrs-%e2%80%93-insights-%e2%80%93-%e2%80%98segment%e2%80%99-your-mind-before-reporting/feed/ 0 http://blogs.sierraatlantic.com/2010/10/tie-takeaways/ http://blogs.sierraatlantic.com/2010/10/tie-takeaways/#comments Fri, 22 Oct 2010 19:58:31 +0000 Raju Reddy http://blogs.sierraatlantic.com/?p=407 Over this weekend, I was at TiE Southern California’s annual event focused on promoting entrepreneurship. The event attracted well over 700 people on a Saturday, all readily paying the conference fee to learn from other entrepreneurs’ experience and to network with fellow attendees. The panel I participated in, “Selling and Marketing in the next decade”, was itself attended by over 200 people. It is indeed very encouraging to see the interest people have in entrepreneurship especially at a time when our country needs such aspiring entrepreneurs to help bring the economy back. Unlike similar events in Silicon Valley that I attend, the participants also came from diverse industries such as Hospitality and Entertainment besides just Information Technology. While the United States has several challenges on both economic and political fronts overseas, my optimism about its future and its place in the world is reaffirmed when I interact with such bright and ambitious people on a weekend afternoon.

TiE (“The Indus Entrepreneurs”) is the world’s largest network of entrepreneurs, with 56 chapters spread across 13 countries. This equals a staggering 13,000 members! The organization’s mission is to promote entrepreneurship through mentoring, networking and education.

Saturday’s event features an impressive list of speakers – including a keynote speakership by NYT bestselling author Dr. Deepak Chopra, among others! We’re proud to have Raju represent Sierra Atlantic in such good company and we look forward to him sharing his experiences.

Not to delve too much into the history, most of us are aware  IFRS in general,  through various ‘Accounting Standards’  mandates a set of principles, practices  and disclosure requirements that organizations are required to follow with a general intent to promote uniform adoption of accounting practices, laying the foundation for significantly enhanced financial data quality, thereby enabling all stakeholders in improving the quality of analysis and reflecting  a truly ‘Fair’ view of the financial statements. It is pertinent to note that most of the advanced (USA, UK, Canada) and developing economies (India, China) are either in a stage of transition or in the first stages of active implementation of this ‘convergence’.  Over the years accounting bodies around the world, have prescribed and administered a set of (Local) Accounting Standards for adherence by entities  operating within their respective jurisdiction which,  in most cases ,vary with the  IFRS standards  requiring ‘convergence’  during IFRS adoption.

With the above backdrop, as I see, every IFRS ‘convergence’ needs to address the following aspects i.e. :

1. 1. ‘Accounting’  – analyzing the impact of IFRS standards vis-a-vis the local standards –  to account for the net financial  impact of the variations, if any,  in the financial statements of the first  period in which such convergence is mandated. – Ex. In India, organizations moving over to IFRS standards in March, 2011 will have to undergo this exercise as on the first reporting date – i.e. 31^st March, 2011 and also for the previous  year(s) comparative financial data required to be provided.  [Significant impact areas are – Recognition of all assets / liabilities arising out of financial derivatives, recognition of liability on defined benefit plans,  warranties, guarantees etc.,]   In my view, this is largely a ‘one time’ exercise which will set the base for new/ changed  accounting requirements.

1. ‘Information Systems’ –  Essentially this is a byproduct of the previous step and presents a need to assess the landscape of ‘Enterprise Applications’ to devise strategies for continued compliance.  (in Oracle eBS parlance, options for changes to accounting structures, recording of transactions in General Ledger,  examining edge applications in Oracle – E.g. Financial consolidations using  tools like Hyperion)  are examined.

• Here is where IT service providers with deep insights into specific Enterprise Applications, can provide sound counsel and present workable strategies for a seamless transition in  double quick time!

Before it gets any longer, bye for now! As I close, I wish to mention all such ‘convergence’  stem out of the increased thrust on the overall ‘Governance, Risk and Compliance’ [GRC] as ‘accounting innovations’ are on the rise?? (any guess??)

In the forthcoming editions, I will cover insights into specific areas of IFRS and then extend reach to GRC.

So where does production scheduling fit into the complex equation of Supply Chain Planning?

We all know that material moves through a supply chain from Buy->Make->Sell, where as the planning activity focuses in the reverse direction Sell (Demand) -> Make (Manufacture) -> Buy (Supply). Each of these individual activities can be broken down to their sub levels but as we can see, Make (manufacturing) is where the core production activity is centered in a typical supply chain. Production planning amounts to what and when we need to manufacture in order to effectively meet the customer demands where as Production Scheduling is the actual process of deciding how to commit resources between various possible tasks. In a nutshell, if you have planned to do multiple tasks, you cannot do all tasks in one go – you have to schedule and synchronize them. The end objective of Production Scheduling is to maximize through-put & customer service levels and at the same time minimize downtime, inventory, changeovers, overtime etc. All this leads us to believe that in order to have a perfectly synchronized manufacturing eco system, today’s shop floor planners need efficient and cutting edge scheduling tools.

Oracle’s best of breed Value chain planning solutions (VCP) address a wide array of supply chain planning challenges in today’s world.  One of the key elements of Oracle VCP is Production Scheduling (PS) ,which is a finite planning and scheduling tool that was originally part of JD Edwards which after the acquisition by Oracle, has been seamlessly integrated with Oracle E-Business Suite. Oracle Production scheduling solution comes with feature rich functionalities that would make the life of a shop floor planner more comfortable. The planners can now not only make informed decisions but also align the manufacturing activities to meet the organizations objectives. Some of the high level features of Oracle Production Scheduling (PS) are –

1. Graphical and intuitive UI with high level of flexibility built into it such as Gantt charts, Multi-Capacity Resource views, graphical routings Etc
2. Analytical view with drill down to root cause analysis of constraint violations.
3. Ability to model complex what-if simulations and compare against a base plan
4. Automatic floating bottle neck detection and rescheduling
5. Key Performance Indicators (for e.g. order fill, line fill, Inv. Turns, resource utilization etc)
6. Out-Of-Box integration with Oracle E-Business Suite

Oracle Production Scheduling supports both discrete and process mode of manufacturing. PS can be implemented either in a standalone mode or in an integrated mode with Oracle EBS. PS requires very minimal setups from an Implementation perspective and can be deployed almost immediately.

This is a brief introduction to Production Scheduling (PS) module. In next discussions I would be giving a high level overview of PS’s close cousin – Oracle Strategic Network Optimization (SNO).

The breadth of services covered under the Acclivity tool program spans across the life cycle of an Upgrade Project ranging from pre-upgrade assessment services, impact analysis during the upgrade and data reconciliation efforts in the post upgrade phase.

To help our Oracle ERP customers align with Oracle’s direction, Sierra Atlantic has always believed in making available to its customers, cutting edge technology tools and Solutions that enable them to seamlessly upgrade and leverage the product benefits. These tools are aimed at managing the complexity associated with the myriad of customizations that enterprises have, so that they can have crystal clarity into their future application roadmap.

Having already implemented the Acclivity tool in several successful R12 engagements, we have yet again taken another generational leap in futuristic technology tools by migrating it to a cloud based paradigm that would help our customers access the tool from anywhere, pay per use, and leverage the compelling benefits that the multifaceted cloud computing architecture offers.

We have several topics today that I wanted to touch on since our last communication before the NACHA show in Seattle:  the NACHA Payments Conference, the importance of STP and BankON™ 2.0

NACHA Payments Conference – Seattle, WA – April 25 – 28, 2010

The NACHA Payments Conference was a fantastic show.  Hundreds of banks and Corporations got together to share best practices on electronic trading, secure networks and new ways to initiate payments: like “Twitter-pay”!  The industry is moving as fast as possible to a paperless transaction society, for both B-2-C and B-2-B.  Convenience, ease of use, security, cost, speed, and managing change will always be the key determinants that Consumers and Companies consider when looking for a payments solution that makes sense.

The BankON™ team was there, showcasing and demoing Sierra Atlantic’s seamless ERP-to-bank STP solution.  We also issued a Press Release at NACHA which generated quite a bit of interest at the event.  We met hundreds of incredible people and their positive reinforcement and ideas were gratefully received.

BankON™ 2.0

BankON™ 2.0 was recently delivered on time and on target for final testing by one of our larger multinational banking partners.  This production release will go into end-user customer accounts late this summer.  If you would like to learn more about BankON™, visit our web page at www.sierraatlant.com/bankon, or contact Pat Lowery, our Director of Product Marketing, at Pat.Lowery@SierraAtlantic.com.

Please have a great summer and we look forward to working with you.

Phil

Over 2000 people are expected to walk/run in the 5k/10k/half marathon and attend the cultural extravaganza, the food fair and a health screening program, which will run simultaneously to the walkathon.

Sierra Atlantic CEO Raju Reddy at the Sevathon Torch Passing

Here is what the CEO of Sierra Atlantic, Raju Reddy had to say about the event in the press release of Sevathon: “It is a unique event that brings together over 38 of the largest and most vibrant non-profits in the Bay Area. We are embodying the spirit of Mahatma Gandhi-he inspired an entire nation via his walk and selfless “seva” to his nation. That’s our cause, “seva” in whatever form, manner or spirit and wherever on the planet. The Sevathon non-profits are working across the globe from village in Africa to the rural heartlands of India. We are simply bringing their work and their passion to the people. We are providing a common platform to our local communities to learn about the amazing work these organizations are doing and choose to help a cause they feel close to”.

So this would be a great event to attend and you can register at http://www.indiacc.org/sevathon/register and you read the Sevathon Press Release at http://www.indiacc.org/pdfs/SPR.pdf.

(A picture of the award winners, 4^th from the right is representative of Sierra Atlantic)

Xiaomin Zheng, Vice President of China Operations of Sierra Atlantic, received the award and shared his vision of Sierra Atlantic’s development in 2010.

The award is issued by “China Software and Service Outsourcing Network”, which is the official website of the China Software Industry Association. The evaluation committee has extremely strict requirements and examination processes on the company data provided by hundreds of participants, in order to ensure the most authoritative, authentic and fair competition. This award selection has been held for its sixth year. It’s one of the earliest and most influential recognitions of the service outsourcing industry in China. It’s highly valued by government. Also hundreds of media outlets (including TV stations, newspaper, magazines, and websites) across the nation reported the release of the award.

With this great recognition, Sierra Atlantic remains constantly committed to providing world-class IT Services, Outsourced Product Development Services, and Business Process Integration Services to our distinguished clients.

Off late “Revenue Model” coupled with “Application Portfolio Management” is gaining ground in the outsourcing market. This is generally used for support and projects combined.  Let me explain, considering an enterprise IT scenario. (1) Your key applications need a dedicated support. I.e. you’re critical business applications that have highest complexities and larger user base, needs highest level of support and hence a “Dedicated Model” from your service provider is a must to meet your business needs.  (2) Your less complex applications, even if large user base might suffice a “Shared Model”. When managed well, this will provide higher level of efficiencies and greater cost savings. Both these models have been in place for a while, the scope of shared services model has been growing. (3) There is always (small) set of applications that are low in complexities and small user base in most enterprise IT.  These are effective candidate for “Pay-Per-Use” model. I.e. a ticket/transaction based model and one pays for services only when required. Much like our toll roads, you pay when you use. I must warn you though “Pay-Per-Use” term is used in many contexts and generally for projects.

Applications management services are like buying insurance, as contingency. CIOs can now view the entire IT applications as portfolio and divide them to be serviced in “Dedicated, Shared and Pay-Per-Use” model for best efficiencies. The industry should see growing maturity with these offerings in next few years, but this is right time to ask your outsourcer(s). The availability of APM (Application Portfolio Management) tool should further help this cause.

I would love to hear your views or any experience.