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
-
Reversing Journals are special journals that are automatically reversed after a specified date. A reversing entry is a journal entry to “undo” an adjusting entry. When you create a reversing journal entry it nullifies the accounting impact of the original entry. Reversing entries make it easier to record subsequent transactions by eliminating the need for certain compound entries. See an example of reversing journal entry!
-
In every journal entry that is recorded, the debits and credits must be equal to ensure that the accounting equation is matched. In this article, we will focus on how to analyze and recorded transactional accounting information by applying the rule of credit and debit. We will also focus on some efficient methods of recording and analyzing transactions.
-
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.
-
Learn the typical accounting cycle that takes place in an automated accounting system. We will understand the perquisites for commencing the accounting cycle and the series of steps required to record transactions and convert them into financial reports. This accounting cycle is the standard repetitive process that is undertaken to record and report accounting.
-
Introduction to Organizational Structures
Organizations are systems of some interacting components. Levitt (1965) sets out a basic framework for understanding organizations. This framework emphasizes four major internal components such as: task, people, technology, and structure. The task of the organization is its mission, purpose or goal for existence. The people are the human resources of the organization.
-
Internally, an organization can be structured in many different ways, depending on their objectives. The internal structure of an organization will determine the modes in which it operates and performs. Organizational structure allows the expressed allocation of responsibilities for different functions and processes to different entities such as the branch, department, workgroup and individual.
-
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.
-
In some of the ERP tools, there are more than 12 accounting periods in a financial year. This article discusses the concept of accounting calendar and accounting periods. Learn why different companies have different accounting periods. Understand some of the commonly used periods across different organizations and the definition & use of an adjustment period.
-
Hierarchical Organization Structures
Hierarchical structure is typical for larger businesses and organizations. It relies on having different levels of authority with a chain of command connecting multiple management levels within the organization. The decision-making process is typically formal and flows from the top down.
-
General Ledger - Advanced Features
Modern automated general ledger systems provide detailed and powerful support for financial reporting and budgeting and can report against multiple legal entities from the single system. These systems offer many advanced functionalities right from journal capture to advanced reporting. This article will provide an overview of some advanced features available in today's General Ledgers.
