Magazine article CMA - the Management Accounting Magazine

Information Management in a Global Company

Magazine article CMA - the Management Accounting Magazine

Information Management in a Global Company

Article excerpt

In today's business environment many companies are either competing internationally or have competitors with a global perspective. As a result, many new management accounting techniques are being developed. To aid in the dissemination of these new techniques, the Financial and Management Accounting Committee (FMAC) of the International Federation of Accountants (IFAC) has commissioned a series of articles intended to provide insight into these new international practices. The following is a brief summary of the first article in this series. The author is Malcolm Storey who works for ZENECA Limited which has operations in Europe, North America and Asia. He is based in the U.K. and specializes in the design and implementation of re-engineered business systems.

Synopsis

Many companies are responding to today's tough conditions by re-engineering their business processes; this frequently involves replacing information systems. New business processes often operate on an international scale, and so also do information systems.

These new information systems face a number of challenges. For example, can a new internationally based system meet the legal/fiscal reporting requirements of each country in which the company operates, as well its own international business reporting requirements? Meeting this sort of challenge means that accountants have an important role to play in the re-engineering of business information system.

This paper describes how one international company configured the accounting elements of its new systems to meet this sort of challenge. The company defined its own chart of accounts, and a way of implementing it, to support international business requirements as well as local reporting.

This involved a fundamental shift in the focus of operational accounting systems from a local legal entity structure to an international business structure. The accounting system now operates on a set of group accounting principles, rather than local country-based ones, and local external reporting obligations are met off-line. Also, there has been an integration of management and financial results on an international scale. Legal entity results are produced as a natural by-product of systems that support the new business processes.

In effect the company developed a common "accounting language" that provided a set of specific definitions, policies and procedures. Its purpose was to articulate, as a coherent whole, that set of targeted internal business and internal regulatory requirements which must be managed on an international scale. At the heart of the "accounting language" was the chart of accounts which the company looked on as an information management tool. …

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