- ERP system allowing weighted average inventory costs:-In an inflationary environment, companies using FIFO would report more cost of sales(and therefore lesser profits) when their ERP system permits weighted average cost of inventory calculations
- Systems speed allowing faster booking of sales:- Unilever Plc reported in its 3Q'11 statement that Major SAP upgrade in North America brought sales forward into Q3 from Q4. That means that while earlier processes may have lead to time lag in recognizing sales, the upgrade allowed faster recognition. While this issue is one-time, it is still good to know
- Indian bank system generated NPAs method lowering profits! An oft cited reason for rising NPAs in the banking system, is that the earlier manual system of assigning borrowers accounts as 'non performing' and provisioning, has been transitioned to system generated provisions for all major banks, which reduces the margin of error in these.
- Barcoding inventory ensuring accurate shrinkage calculations:-Otherwise, small value items theft can be missed out in inventory due to unfavourable cost benefit calculation of manual verification. But having bar codes in place would allow higher accuracy of measuring those losses, and consequential lower reported profits.
Wednesday, February 1, 2012
How technology impacts financial reporting results
At the outset, one may think that when business drives results, then how can a support function like technology have any impact on reported numbers(except maybe as a cost driver)? The reality is that accounting is driven by many estimates/time lags etc, and anything that impacts the accuracy/speed of those estimates(be it technology, systems, processes etc) affects financial reporting. Below are some examples of the same