determine the difference between internal and external reporting © dale r. geiger 20111
TRANSCRIPT
© Dale R. Geiger 2011 1
Determine the Difference Between Internal and External Reporting
Principles of Cost Analysis and Management
© Dale R. Geiger 2011 3
Terminal Learning Objective
• Task: Determine the Difference Between Internal and External Reporting
• Condition: You are a cost advisor technician with access to PCAM course handouts, readings, and spreadsheet tools and awareness of Operational Environment (OE)/Contemporary Operational Environment (COE) variables and actors.
• Standard: with at least 80% accuracy:• Define the 4 characteristics of accounting information• Identify the difference between internal and external reporting• Classify GFEBS reports as internal or external
© Dale R. Geiger 2011 4
What Do Accountants Do?
• Provide INFORMATION that is USEFUL to Decision Makers
• Information must be RELIABLE• Free from Bias• Verifiable
• Information must be RELEVANT• Will make a difference in the decision• Timely – frequency and lag time• Relevance is in the eye of the User
© Dale R. Geiger 2011 5
What Do Accountants Do?
• Provide INFORMATION that is USEFUL to Decision Makers
• Information must be RELIABLE• Free from Bias• Verifiable
• Information must be RELEVANT• Will make a difference in the decision• Timely – frequency and lag time• Relevance is in the eye of the User
© Dale R. Geiger 2011 6
What Do Accountants Do?
• Provide INFORMATION that is USEFUL to Decision Makers
• Information must be RELIABLE• Free from Bias• Verifiable
• Information must be RELEVANT• Will make a difference in the decision• Timely – frequency and lag time• Relevance is in the eye of the User
© Dale R. Geiger 2011 7
What Do Accountants Do?
• Provide INFORMATION that is USEFUL to Decision Makers
• Information must be RELIABLE• Free from bias• Verifiable
• Information must be RELEVANT• Will make a difference in the decision• Timely – frequency and lag time• Relevance is in the eye of the User
© Dale R. Geiger 2011 8
What Do Accountants Do?
• Provide INFORMATION that is USEFUL to Decision Makers
• Information must be RELIABLE• Free from bias• Verifiable
• Information must be RELEVANT• Will make a difference in the decision• Timely – frequency and lag time• Relevance is in the eye of the User
© Dale R. Geiger 2011 9
What Do Accountants Do?
• Provide INFORMATION that is USEFUL to Decision Makers
• Information must be RELIABLE• Free from Bias• Verifiable
• Information must be RELEVANT• Will make a difference in the decision• Timely – frequency and lag time• Relevance is in the eye of the user
© Dale R. Geiger 2011 10
Who are the Users?
• Users may be INTERNAL or EXTERNAL• Internal users are:
• Managers and Leaders • What types of Decisions might they make?• What information might they need?
• External users are:• Investors, Creditors, Regulators and Legislators• What types of Decisions might they make?• What information might they need?
© Dale R. Geiger 2011 11
Who are the Users?
• Users may be INTERNAL or EXTERNAL• Internal users are:
• Managers and Leaders • What types of Decisions might they make?• What information might they need?
• External users are:• Investors, Creditors, Regulators and Legislators• What types of Decisions might they make?• What information might they need?
© Dale R. Geiger 2011 12
Who are the Users?
• Users may be INTERNAL or EXTERNAL• Internal users are:
• Managers and leaders • What types of decisions might they make?• What information might they need?
• External users are:• Investors, Creditors, Regulators and Legislators• What types of Decisions might they make?• What information might they need?
© Dale R. Geiger 2011 13
Who are the Users?
• Users may be INTERNAL or EXTERNAL• Internal users are:
• Managers and leaders • What types of decisions might they make?• What information might they need?
• External users are:• Investors, creditors, regulators, legislators and
citizens • What types of decisions might they make?• What information might they need?
© Dale R. Geiger 2011 14
External User Needs
• Examining an organization’s performance over time demands CONSISTENCY• Assures users that the information is prepared in
the same manner over multiple time periods• Deciding whether to fund competing
organizations or programs demands COMPARABILITY• Assures that the information from all organizations
is prepared according to the same set of principles
© Dale R. Geiger 2011 15
External User Needs
• Examining an organization’s performance over time demands CONSISTENCY• Assures users that the information is prepared in
the same manner over multiple time periods• Deciding whether to fund competing
organizations or programs demands COMPARABILITY• Assures that the information from all organizations
is prepared according to the same set of principles
© Dale R. Geiger 2011 16
External User Needs
• Examining an organization’s performance over time demands CONSISTENCY• Assures users that the information is prepared in
the same manner over multiple time periods• Deciding whether to fund competing
organizations or programs demands COMPARABILITY• Assures that the information from all organizations
is prepared according to the same set of principles
© Dale R. Geiger 2011 17
External User Needs
• Examining an organization’s performance over time demands CONSISTENCY• Assures users that the information is prepared in
the same manner over multiple time periods• Deciding whether to fund competing
organizations or programs demands COMPARABILITY• Assures that the information from all organizations
is prepared according to the same set of principles
© Dale R. Geiger 2011 18
External User Needs
• Examining an organization’s performance over time demands CONSISTENCY• Assures users that the information is prepared in
the same manner over multiple time periods• Deciding whether to fund competing
organizations or programs demands COMPARABILITY• Assures that the information from all organizations
is prepared according to the same set of principles
© Dale R. Geiger 2011 19
Consistent Combat Ship
16" guns
cruise missiles
landing gatesperiscope
ballistic missiles
flight deck
submersible hull
helicopter pad
torpedotubes
© Dale R. Geiger 2011 20
Check on Learning
• Which characteristic requires timely information?
• Which characteristic requires verifiable information?
• Why would users demand consistency?
© Dale R. Geiger 2011 21
Two Sides of the Same Coin
requiredcompliancestructuredauditstableconsistency &comparability
purposegoal
methodologytest
dynamicsuser need
neededlearning
customizeduse
responsivecontinuous
improvement
external reporting managerial costing
© Dale R. Geiger 2011 22
Two Sides of the Same Coin
requiredcompliancestructuredauditstableconsistency &comparability
purposegoal
methodologytest
dynamicsuser need
neededlearning
customizeduse
responsivecontinuous
improvement
external reporting managerial costing
© Dale R. Geiger 2011 23
Two Sides of the Same Coin
requiredcompliancestructuredauditstableconsistency &comparability
purposegoal
methodologytest
dynamicsuser need
neededlearning
customizeduse
responsivecontinuous
improvement
external reporting managerial costing
© Dale R. Geiger 2011 24
Two Sides of the Same Coin
requiredcompliancestructuredauditstableconsistency &comparability
purposegoal
methodologytest
dynamicsuser need
neededlearning
customizeduse
responsivecontinuous
improvement
external reporting managerial costing
© Dale R. Geiger 2011 25
Two Sides of the Same Coin
requiredcompliancestructuredauditstableconsistency &comparability
purposegoal
methodologytest
dynamicsuser need
neededlearning
customizeduse
responsivecontinuous
improvement
external reporting managerial costing
© Dale R. Geiger 2011 26
Two Sides of the Same Coin
requiredcompliancestructuredauditstableconsistency &comparability
purposegoal
methodologytest
dynamicsuser need
neededlearning
customizeduse
responsivecontinuous
improvement
external reporting managerial costing
© Dale R. Geiger 2011 27
Two Sides of the Same Coin
requiredcompliancestructuredauditstableconsistency &comparability
purposegoal
methodologytest
dynamicsuser need
neededlearning
customizeduse
responsivecontinuous
improvement
external reporting managerial costing
© Dale R. Geiger 2011 28
Example
External Report: Tax Return • Why?• How?• Test of success?• Dynamics?
Internal Report: Checkbook• Why?• How?• Test of success?• Dynamics?
© Dale R. Geiger 2011 29
Research: System Uses at 59 Federal Organizations
1 2 3 4 5 6 7 8
9 10 11 12 13 14 15 16
17 18 19 20 21 22 23 24
25 26 27 28 29 30 31 32
33 34 35 36 37 38 39 40
41 42 43 44 45 46 47 48
50 51 52 53 54 55 56 57
58 59
mgmt control
pricingOH allocation
reqr costing
BLM PBS
VMSS
WVA
FGIS
© Dale R. Geiger 2011 30
Research: System Uses at 59 Federal Organizations
1 2 3 4 5 6 7 8
9 10 11 12 13 14 15 16
17 18 19 20 21 22 23 24
25 26 27 28 29 30 31 32
33 34 35 36 37 38 39 40
41 42 43 44 45 46 47 48
50 51 52 53 54 55 56 57
58 59
mgmt control
pricingOH allocation
reqr costing
BLM PBS
VMSS
WVA
FGIS
© Dale R. Geiger 2011 31
Research: System Uses at 59 Federal Organizations
1 2 3 4 5 6 7 8
9 10 11 12 13 14 15 16
17 18 19 20 21 22 23 24
25 26 27 28 29 30 31 32
33 34 35 36 37 38 39 40
41 42 43 44 45 46 47 48
50 51 52 53 54 55 56 57
58 59
mgmt control
pricingOH allocation
reqr costing
BLM PBS
VMSS
WVA
FGIS
© Dale R. Geiger 2011 32
Research: System Uses at 59 Federal Organizations
1 2 3 4 5 6 7 8
9 10 11 12 13 14 15 16
17 18 19 20 21 22 23 24
25 26 27 28 29 30 31 32
33 34 35 36 37 38 39 40
41 42 43 44 45 46 47 48
50 51 52 53 54 55 56 57
58 59
mgmt control
pricingOH allocation
reqr costing
BLM PBS
VMSS
WVA
FGIS
© Dale R. Geiger 2011 33
Research: System Uses at 59 Federal Organizations
1 2 3 4 5 6 7 8
9 10 11 12 13 14 15 16
17 18 19 20 21 22 23 24
25 26 27 28 29 30 31 32
33 34 35 36 37 38 39 40
41 42 43 44 45 46 47 48
50 51 52 53 54 55 56 57
58 59
mgmt control
pricingOH allocation
reqr costing
BLM PBS
VMSS
WVA
FGIS
© Dale R. Geiger 2011 34
Research: System Uses at 59 Federal Organizations
1 2 3 4 5 6 7 8
9 10 11 12 13 14 15 16
17 18 19 20 21 22 23 24
25 26 27 28 29 30 31 32
33 34 35 36 37 38 39 40
41 42 43 44 45 46 47 48
50 51 52 53 54 55 56 57
58 59
mgmt control
pricingOH allocation
reqr costing
BLM PBS
VMSS
WVA
FGIS
© Dale R. Geiger 2011 35
Research: System Uses at 59 Federal Organizations
1 2 3 4 5 6 7 8
9 10 11 12 13 14 15 16
17 18 19 20 21 22 23 24
25 26 27 28 29 30 31 32
33 34 35 36 37 38 39 40
41 42 43 44 45 46 47 48
50 51 52 53 54 55 56 57
58 59
mgmt control
pricingOH allocation
reqr costing
BLM PBS
VMSS
WVA
FGIS
Check on Learning
• What are the basic uses for Cost Accounting systems?
• Should all cost systems be the same?• Why or why not?
© Dale R. Geiger 2011 36
What about GFEBS?
• General Fund Enterprise Business System• Used Army-wide• Permits real-time posting of financial
transactions• Reports costs according to Budget-relevant
and non-Budget-relevant Cost Objects• Are GFEBS reports internal or external?
© Dale R. Geiger 201137
Unit Cost Report
This report shows the actual and planned quantities and actual and
planned (average) unit cost for various SKFs (Statistical Key Figures)
such as Headcount.
© Dale R. Geiger 2011 39
Discussion Questions
• Who would use this report? • How might they use it?• If you were the Senior Leader of this
organization, would you be surprised that your cost per headcount was $78,919.20?
• What would you want to know about that number?
• Would this be an internal or external report for you?
© Dale R. Geiger 2011 40
Check on Learning
• What characteristics would identify a report as internal to an organization?
• What characteristics would identify a report as external to an organization?
© Dale R. Geiger 2011 41