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Kishore Jethanandani

The Devil of Poor Performance Is in the Details of Financial Data

Kishore Jethanandani
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batye
batye
5/5/2014 11:21:10 PM
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Re: Scalping pennies...
:) it like everyone get lost in the small details forgeting about bigger picture... scarry but true... as it happens almost everywhere... reality of globalization and integration... but forgeting it roots... how I see it ...

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Brian Dean
Brian Dean
5/5/2014 11:13:28 PM
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Re: Scalping pennies...
Agreed, communication between groups, scale of groups and geographical locations (on the continental scale) are some of the reasons that have created this barrier. Granted, it has only been around 250 years since the industrial revolution made accounting a must have tool in order to direct capital towards production, this rapid trend made it difficult for businesses to focus on accounting standards and growth both at the same time. Hence, we find so many different accounting bodies around that world, and often times there are not compatible.

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batye
batye
5/5/2014 10:28:01 PM
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Re: Scalping pennies...
thank you... the problem it more like two groups could not get on the same page or have good ability to communicate properly... creating barriers for each other...

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Brian Dean
Brian Dean
5/5/2014 10:26:21 PM
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Re: Scalping pennies...
Good point about the catch 22 paradox. It makes me wonder whether software could be the solution that can create a truly global financial report standard -- one that does not take ages to learn. Or maybe, hardware will need to reach the stage of quantum computing before any such software can work in a timely fashion.

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batye
batye
5/5/2014 9:52:23 PM
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Re: Scalping pennies...
could not agree more a lot of the times it create catch 22 problems... 

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Kim Davis
Kim Davis
4/14/2014 3:09:45 PM
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Re: Scalping pennies...
Thanks for the detailed explanations, Kishore.

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Brian Dean
Brian Dean
4/8/2014 6:19:24 PM
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Re: Scalping pennies...
Agreed, this is exactly the kind of problem that has its roots from management accounting. LIFO is not allowed by IFRS and hence it is not that popular. Nonetheless, a small number of firms do use LIFO to calculate their inventory levels, which creates a problem.

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Kishore Jethanandani
Kishore Jethanandani
4/3/2014 7:55:33 PM
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Re: Scalping pennies...
@Brian Dean: Financial statements are often hard to compare across different companies because they may well use different conventions. For example, First-in-First Out for inventory compared to Last-in-First-Out will have very different impacts on expensing of raw materials especially if you take into account impact of inflation. Similarly, goodwill, fixed costs and more.

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Brian Dean
Brian Dean
4/3/2014 7:31:35 PM
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Re: Scalping pennies...
@Kishore, thank you, my take on financial accounting is that it works nicely to compare one business with another business because it follows a set of pre-defined rules. For instance, profitability ratio, liquidity ratio, efficiency ratio, position ratio and gross profit etc, will all be calculated in the same way in every company's balance sheet and income statement. These rules are good but internally, having such rules makes it difficult to calculate cost for example, proportioning costs to a support function, and this is where management account provides a flexible framework.

But a lot can happen from the budget creating period to flexing it and finally, closing it. This makes comparing performance of one support function to another support function of a different business, a difficult process. By illustrating the mining industry example, adaptive insight solved this problem.  

 

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Kishore Jethanandani
Kishore Jethanandani
4/3/2014 2:45:50 PM
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Traditional management accounting
BTW, the use of the term traditional management accounting is confusing. ABC is very much part of management accounting and the publisher of the cited document confirmed that. The adjective traditional with management accounting has probably been used to imply cost accounting based on financial data from financial statements. Its really a misnomer and I have asked the publisher to clarfy.

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