acquire-to-retire discussion...
TRANSCRIPT
Acquire-to-RetireDiscussion Document
DriversDrivers
Changes are prompting financial executives to take another look Changes are prompting financial executives to take another look at their assets based on a variety of reasons:at their assets based on a variety of reasons:
M&A activities M&A activities RevaluationsRevaluationsValidation of existence andValidation of existence andIntegration of systemsIntegration of systemsNexusNexus
C t ttiC t ttiCost cutting measures Cost cutting measures Tax impacts of asset values, depreciation and locationsTax impacts of asset values, depreciation and locationsPotential insurance savingsPotential insurance savingsAutomation of data collectionAutomation of data collectionAutomation of data collectionAutomation of data collection
InefficienciesInefficienciesManual activities impacting days to closeManual activities impacting days to closeManual activities impacting days to closeManual activities impacting days to closeDisparate systems creating problems in accuracy and availability of dataDisparate systems creating problems in accuracy and availability of dataLack of asset tracking tool, processes and procedures requiring attentionLack of asset tracking tool, processes and procedures requiring attention
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Drivers, continuedDrivers, continued
Inaccuracies in reportingInaccuracies in reportingUnreported asset transactionsUnreported asset transactionsUnreported asset transactionsUnreported asset transactionsGhost assets requiring identificationGhost assets requiring identificationBusiness unit, regional and departmental requirementsBusiness unit, regional and departmental requirementsProduct costing inaccuracies Product costing inaccuracies Tax & MD&A’sTax & MD&A’sInaccuracy in CIP balancesInaccuracy in CIP balances
P d i t iP d i t iProcesses and requirements issuesProcesses and requirements issuesCapital expenditure processesCapital expenditure processes
Policies & procedures require updatingPolicies & procedures require updatingA h i i li i d h h ld i d iA h i i li i d h h ld i d iAuthorization limits and thresholds require updatingAuthorization limits and thresholds require updatingProject tracking needs to be addressedProject tracking needs to be addressedAccounting treatment requiring clear definitionsAccounting treatment requiring clear definitions
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Drivers, continuedDrivers, continued
Systems do not support needsSystems do not support needsProject management system integrationsProject management system integrationsProject management system integrationsProject management system integrationsFixed asset systems require updating/integrationFixed asset systems require updating/integrationData collection tools require updatingData collection tools require updating
Controllers lose sight of what assets they actually haveControllers lose sight of what assets they actually havePhysical inventories required (cycle counting)Physical inventories required (cycle counting)Asset tagging/identification process & procedures requiredAsset tagging/identification process & procedures requiredAccuracy and/or reliability of data needs improvement Accuracy and/or reliability of data needs improvement Market values require updatingMarket values require updating
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Acquire-to-Retire Life CycleAcquire-to-Retire Life Cycle
The AcquireThe Acquire--toto--Retire life cycle encompasses activities from Retire life cycle encompasses activities from prepre--acquisition through retirement acquisition through retirement
PrePre--acquisition processesacquisition processesAcquisition processesAcquisition processesMonitoring & tracking Monitoring & tracking Financial and statistical reportingFinancial and statistical reporting
Processes require significant data collection and manual Processes require significant data collection and manual interventionintervention
Multiple sources of informationMultiple sources of informationNonNon--automated activitiesautomated activities
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Processes & ActivitiesProcesses & Activities
Pre-acquisitionMonitoring
& Tracking
ReportingAcquisitionTracking
Capital expenditurerequests
Purchasing requisitions
Data collection
Data entry
Depreciation andamortization
Justificationrequirements
Project approvals
Project tracking
Purchase orders
Receiving
Disbursements
A l
Asset transfers
Disposals
Status changes
BU, Country,regional balancesheet & P&L
Product costingProject tracking
Capitalizationgovernance
Approval processes
Capital &expense distribution
Other significant activities
MD&A
Tax
Analyticsdistribution
Assetidentification
Market values
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Pre-acquisition ProcessesPre-acquisition Processes Pre-acquisition
Processes and systems utilized in the pre-acquisition include budget/planning, Project Management processes and the Purchasing processes.• Pre-acquisitionPre acquisitionphases include the process of Capital Expenditurerequests and approvals which
‒ Utilize project tracking methodologies‒ Utilizes CapEx policies & procedures CaPex
Approval/ authorization
Polices
Project
Budgeting/ ah-hoc
requirements Purchasing
Purchase Review &Ut es Cap po c es & p ocedu es‒ Follows Capital & spending authority limits‒ And follows Capitalization/depreciation rules
CaPex Request
Management module
order requisitioning
Systems/applications
Governance/Polices & Procedures
The CapEx process normally defines - Authorization levels and information requiredfor the approval process; Capitalization policies and procedures; Initial
d t t l/b i it hi
Review & approvals
Governance/Polices & Procedures
Activities
departmental/business unit ownership
Common Issues Lack of CapEx policies & proceduresp p p Outdated authorization matrices Lack of adherence Lack of project tracking tools Accounting treatments not clearly defined
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g y Lack of accountability
Acquisition ProcessesAcquisition Processes Acquisition
The acquisition process in normally when the fixed asset subsystem gets populated. Typically though, records are summarized into the general ledger and manually researched to be entered into the fixed asset modules.• Purchase order processes Data from this processPurchase order processes Data from this process
can be used to pre-populate assets subsystems and project management.
‒ Requisition data‒ Vendor and asset information
Approval/ authorization
Polices
Purchase order processing
Receiving
Validation and data collection
General Ledger
Fixed Assets‒ Asset information
• Purchasing including the approval of purchase orders‒ Can be used for project tracking‒ Can be used to compare against authorized
j t dit ( t t d t l )Systems/applications
Project Management
modulePurchasing Accounts
Payable
Fixed Assets
project expenditures (automated controls) ‒ Used to track commitments (open PO’s)
• Receiving process is typically the process in which the data is captured into Accounts Payable
‒ Data from A/P transactions are used to populate
Governance/Polices & Procedures
Activities
Common Issues
• Non-standardized requisition processes‒ Data from A/P transactions are used to populate the fixed assets module (quite often manually)
‒ Receiving documents should contain vital information such as serial #’s, model #’s and very distinct descriptors and can be automated
l i d fi ld
• Lack of integration with A/P and project tracking• Incorrect accounts being utilized• Asset data not being captured• Detailed asset information not available
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to populate required fields.
Monitoring & Tracking ProcessesMonitoring & Tracking Processes Monitoring &
Tracking
Data collection and monitoring are the most data intense portion of Acquire-to-Retire. These processes require specific data about individual assets or asset groups as well the activities that take place. • Data Collection phases normally require the mostData Collection phases normally require the most
manual activity. This is due to the fact that much information is not available.
‒ A/P records‒ Divisional/department asset activities
Asset Capitalization
Policies
Data collection Validation and adjustments
General Ledger
‒ Disposals‒ Transfers‒ Maintenance (if tracked)
Systems/applications
BU, Regional reporting
Accounts Payable
Fixed Assets
• A/P close process will generate additional fixed asset activities which will need to be included in the fixed asset module.
• Divisional/department submissions include asset
Governance/Polices & Procedures
Activities
Common Issues
• Multiple disparate systems• Divisional/department submissions include asset activity that has occurred but need to be taken into consideration throughout the month. These should be standardized reporting methodologies.
• Summarized A/P activity requiring research• Lack of asset movement reporting• Lack of physical inventory policies & procedures• Business units not adhering to corporate
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requirements (Silo’s)• Lack of reporting capabilities
Reporting ProcessesReporting Processes Reporting
The monthly close and reporting process is normally automated within the fixed asset system. Validation processes as well as data flow processes should be in place to capture any activities. Reporting includes the generation of reports for St t tReporting includes the generation of reports for internal and external customers. Reporting requirements include:
‒ Data use for Tax reporting‒ Data used for MD&A’s
A/P month-end close
Data transfer
Monthly Close Schedule/Task
Lists
Regulatory reporting
requirements
CIP review and
reclassification
Asset Disposals,
transfers etc.
Asset change polices & procedures (transfers,
disposals, etc.)
Depreciation/
amortization
Statutory reporting
requirements
‒ Data used by Divisions for inventory tracking
‒ Data used for product costing‒ Data used for tracking
transfer
Systems/applications
TaxFixed Assets
General Ledger
Asset Reporting
Common Issues
• Non-integrated systems
The monthly close process requires the updating of the Fixed Assets module for activities such as CIP completion; Disposals; Transfers; Additions; Reclassifications ; Reconciliations; Roll forwards
Governance/Polices & ProceduresActivities
• Non-integrated systems• Asset reporting inadequate for needs• Validation of calculations not being performed• Results not shared with Tax or BU’s • Reconciliation and roll forwards not being
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Reconciliation and roll forwards not being performed timely
