Defining Reporting Dimensions

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

Creation Date Thursday, 29 December 2022 Hits 2554

You May Also Like

  • Sole Proprietorship Form

    Sole Proprietorship Form

    The sole trader organization (also called proprietorship) is the oldest form of organization and the most common form of organization for small businesses even today.  In a proprietorship the enterprise is owned and controlled only by one person.  This form is one of the most popular forms because of the advantages it offers. It is the simplest and easiest to form.

     

  • The Accounting Cycle

    The Accounting Cycle

    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.

  • Equity and Liability Accounts

    Equity and Liability Accounts

    Funds contributed by owners in any business are different from all other types of funds. Equity is the residual value of the business enterprise that belongs to the owners or shareholders. The funds contributed by outsiders other than owners that are payable to them in the future. Liabilities are generally classified as Short Term (Current) and Long Term Liabilities. Current liabilities are debts payable within one year.

  • Understanding Joint Ventures

    Understanding Joint Ventures

    A joint venture (JV) is a business agreement in which the parties agree to develop, for a finite time, a new entity and new assets by contributing equity. They exercise control over the enterprise and consequently share revenues, expenses and assets.  A joint venture takes place when two or more parties come together to take on one project.

  • GL - Accrued Expenses

    GL - Accrued Expenses

    Accrued expenses, sometimes referred to as accrued liabilities, are expenses that have been incurred but have not been recorded in the accounts. Discuss the need to record accrued liabilities and why they require an adjustment entry. Understand the treatment for these entries once the accounting period is closed and learn to differentiate when the commitments become liabilities.

  • Concept of Representative Office

    Concept of Representative Office

    A representative office is the easiest option for a company planning to start its operations in a foreign country. The company need not incorporate a separate legal entity nor trigger corporate income tax, as long as the activities are limited in nature.

  • GAAP to STAT Adjustments

    GAAP to STAT Adjustments

    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.

  • Concept of Legal Entity

    Concept of Legal Entity

    A legal entity is an artificial person having separate legal standing in the eyes of law. A Legal entity represents a legal company for which you prepare fiscal or tax reports. A legal entity is any company or organization that has legal rights and responsibilities, including tax filings.

  • GL - Recurring Journal Entries

    GL - Recurring Journal Entries

    A “Recurring Journal” is a journal that needs to be repeated and processed periodically.  Recurring Entries are business transactions that are repeated regularly, such as fixed rent or insurance to be paid every month. Learn the various methods that can be used to generate recurring journals. See some examples and explore the generic process to create recurring journals in any automated system.

  • GL - Using Adjustment Period

    GL - Using Adjustment Period

    In most of the automated financial systems, you can define more than 12 accounting periods in a financial year.  This article will explain the concept of the adjustment period and the benefits of having adjustment periods. Adjustment periods have their inherent challenges for the users of financial statements and there is a workaround for those who don’t want to use adjustment periods.

Explore Our Free Training Articles or
Sign Up to Start With Our eLearning Courses

Subscribe to Our Newsletter


© 2023 TechnoFunc, All Rights Reserved