Successfully Navigating the Turbulent Skies of a Large-Scale Erp

Bombardier is the world’s only manufacturer of both planes and trains, it is present in more then 60 countries and is headquartered in Montreal, Canada. Both Bombardier Aerospace & Bombardier transportation employ over 70 000 and posted a revenue of over 18. 3 billion in the fiscal year ended December 31,2011. The case presents the implementation of an ERP system in Bombardier, along with all the major changes the corporation undertook for a successful transition. In the analysis I will address the challenges faced by Bombardier, the challenges associated with the integration of the large system & its benefits.I will also address how the project team managed and communicated it’s vision amongst the firm and how the new roles were defined, communicated & understood. The analysis will focus up to and including the implementation of the system. As the company grew over the years, Bombardier’s strategy of growth by acquisition turned the firm into a â€Å"textbook s ilo organization†. This created problems as systems did not communicate with each other effectively. This inefficiency generated additional costs because the firm had to maintain all the different systems.Another problem, related to the operation of the aerospace division, was the low visibility of inventory and lack of integration between the old computer systems. This caused process delays, low inventory turns & price inconsistency from suppliers. The Bombardier Manufacturing System (BMS) , the group of information technology applications that had been supporting Bombardier Aerospace’s manufacturing activities, had not evolved to cope with the fast changes. The BMS capabilities had become limited. We can assume that Bombardier was not a fully integrated company at that time because there was a clear lack of coordination and unity.An example would be how employees would create numerous stand-alone databases throughout the company on operations specific to their functio n without realizing the negative effect it causes to the rest of the organization such as data errors or omissions. But Bombardier Aerospace was working on becoming an integrated Company, as the Vice-President of Operations and Project Sponsor was aware of the challenges and created a Vision: â€Å"One Company†: To align the operations of its acquired companies by implementing common roles and responsibilities.To meet this enormous challenge, a Enterprise Resource planning (ERP) system was first implemented at Bombardier Aerospace. The first attempt in 2000 was a costly failure. The implementation of this technology without the corresponding organizational changes was the main reason of its failure. The factors that contributed to its breakdown are identified as : Focusing the implementation on inappropriate business processes, an outdated company vision, a weak sponsorship model, insufficient involvement of internal employees and having too many third-party consultants emplo yed on the project.In October 2001, Bombardier Manufacturing Information System (BMIS) was created by the Senior Project Manager to establish a new integrated manufacturing system. BMIS was the first project launched with a vision of an integrated organization. Once completed it would support 9,500 users over seven sites and the main benefit of the system’s integration is the cost savings of over $1. 171 billion and a one time reduction in material inventory of $219 million. To Create & implement such a system, a blue print of the operation was created.An integration team was formed; There role was to identify integration points where a process crossed functional boundaries, and independently resolve integration points that could potentially cause disagreement. The functional council took high –level decisions regarding the design of the projects. The BMIS team requested that the plants provide them with experienced employees for the design phase. Some problems that th e BMIS project manager was concerned about is that there was a lack of strong business employees, although empowered to make decisions and complete the design had to constantly go back to the business in order to validate.Another problem was the documentation that was requested by the BMIS team were not provided. As a result, the Design phase ran over schedule by several months. Bombardier Aerospace decided to go with a progressive implementation of the system. BMIS would be implemented one plant at a time starting with there newest facility, the Mirabel Plant. The Critical success factor for the project was the â€Å" Vanilla† approach to system design: It was important that the first roll-out or implementation of the system at the Mirabel plant to be a controlled one.Bombardier limited the scope of the first roll-out one section at a time and trained the rest of the shop accordingly. This approach would siege the system to one part of the plant and identify lessons for subs equent roll-outs. The Restructuring of the procurement function plays an important role in realizing the vision of the BMIS. As was stated earlier, one of the problems the firm faced was the low visibility of inventory. By improving the visibility, you can reduce inventory levels that would improve liquidity and reduce cycle time.It was decided mid-project to restructure the procurement function, it was undertaken in parallel with the implementation of the BMIS and was called the Material Resource Planning Technology. The main idea for procurement was to minimize the total acquisition cost and overall procurement costs by concentrating on a centralized and strategic sourcing of inventory. This big change would require the training of new employees and have them ready to use the new system.Data Management was also a parallel project, it can be divided in 2 activities: 1. Data Cleansing: identified as a major risk of the project. 2. Data Preparation: Extraction, mapping, staging and c onsolidation of data. Before going live it was important to prepare the users in utilizing the new system. Due to the pressure of staying on schedule, training were delivered to users in a short period of time which wasn’t effective because transmitting such a large amount of information in a sort period resulted in a negative effect.

Beans and More Beans

Beans and More Beans Beans and More Beans Beans and More Beans By Maeve Maddox Considering the flurry of comments triggered by my inclusion of a bean idiom in a recent post, I decided to give the humble bean a post of its own. The noun bean is Germanic in origin. August Fick (1833-1916) German comparative linguist, suggested that bean was cognate with faba, the Latin word for bean, but according to the OED, â€Å"phonetic considerations render this doubtful.† Originally, the word bean referred only to the broad bean (Faba vulgaris), but now it refers to any seed that resembles it. Human beings and beans have had a long relationship; Egyptians buried them with their dead, and Homer mentioned them in the Iliad. On the ancient Roman feast called the Lemuria (or Lumuralia), the pater familias (father of the family) got out of bed at midnight to walk around the house barefoot, throwing black beans over his shoulder. The rite was intended to exorcise any malevolent spirits that had accumulated in the household during the previous year. Pythagoras instructed his followers â€Å"not to love beans,† but he may have been warning them against meddling in politics, not forbidding them to eat beans; beans were used as markers in political elections. Artistotle equated the bean with venery (pursuit of sexual pleasure); to him, â€Å"abstaining from beans† meant â€Å"keeping the body chaste.† As common objects of daily life, beans found their way into literary and proverbial use. â€Å"Not worth a bean† came to mean worthless. Chaucer (1343-1400) uses the expression in â€Å"The Merchant’s Tale.† The hero of the tale is a knight who, after 60 years of bachelorhood, finally decides to marry: â€Å"For no other way of life,† he said, â€Å"is worth a bean.† A person who â€Å"does not have a bean† is poor indeed, although the bean in this expression may originate elsewhere than with the legume. A slang term for a sovereign or a guinea was bean. â€Å"Not to have a bean† meant â€Å"not to have a cent.† â€Å"Not to know beans about something† is to know nothing about it: Charles Faddis Does not Know Beans About Nuclear Energy â€Å"To spill the beans† is â€Å"to reveal a secret†: Drunk Whistleblower Spilled The Beans On Chemtrail Front Company For CIA The business world has a couple of bean expressions all its own. A â€Å"bean counter† is a contemptuous term applied to an accountant or other financial expert by people who feel that creativity is more valuable than mere record-keeping. A beanfeast or beanfest is an annual dinner given by an employer to his employees. The word bean is slang for head: â€Å"Im a bit short on brain myself; the old bean would appear to have been constructed more for ornament than for use, dont you know†Ã‚  Ã¢â‚¬â€œP. G. Wodehouse, My Man Jeeves Wodehouse and other British writers used â€Å"Old Bean† as a friendly term of address: â€Å"You don’t mind my asking, do you old bean?† â€Å"Use your bean† means â€Å"think!† The little cap called a beanie gets its name from this meaning of bean, as does the baseball term bean ball, â€Å"a ball thrown at a batter’s head.† This application of bean has also given us a verb bean, â€Å"to hit someone on the head.† A beanery is a cheap restaurant, presumably because the meals are heavy on beans. The American city of Bostonfamous for its baked beansis often referred to as â€Å"Bean Town.† The expression that inspired this post is â€Å"full of beans,† meaning â€Å"full of energy and high spirits†: [In winter I try] to rise and shine, full of beans, every day.   [Reba] seems fresh, fit and full of beans, projecting herself the way I’m told she always does When I defined â€Å"full of beans† as â€Å"full of energy and high spirits,† several readers informed me of another meaning: â€Å"full of baloney† (or what bologna becomes once it is digested.) â€Å"Full of beans† in the sense of â€Å"energetic† probably originated as stable slang. Bean-fed horses were observed to be in good condition and lively, as in these examples from the OED: 1870  Ã‚   Daily News 27 July 5  Ã‚   The horses [] looked fresh and beany. 1843  R. S. Surtees Handley Cross II. vii. 199  Ã‚   [Hounds, horses], and men, are in a glorious state of excitement! Full o beans and benevolence! Another 19th century use of â€Å"full of beans† noted as stable slang was applied to a person â€Å"whom sudden prosperity had made offensive and conceited.† I suppose that such a stuck-up person could be seen as â€Å"full of beans† in the sense of being â€Å"full of it.† Apparently both meanings are current, so don’t be surprised if you get a puzzled look if your meaning doesn’t match that of your listener. I’ll end with what is probably the best-known bean quotation in popular culture, Rick’s farewell to Ilsa in the movie Casablanca: Ilsa, I’m no good at being noble, but it doesn’t take much to see that the problems of three little people don’t amount to a hill of beans in this crazy world. Want to improve your English in five minutes a day? Get a subscription and start receiving our writing tips and exercises daily! Keep learning! Browse the Expressions category, check our popular posts, or choose a related post below:Creative Writing 1017 Patterns of Sentence StructureHyphenation in Compound Nouns

10 Fascinating Facts About Dung Beetles

10 Fascinating Facts About Dung Beetles Is there anything cooler than a dung beetle pushing a ball of poo? We think not. But lest you disagree, please consider these 10 fascinating facts about dung beetles. 1. Dung Beetles Eat Poop Dung beetles are coprophagous insects, meaning they eat excrement of other organisms. Although not all dung beetles eat poop exclusively, they all eat feces at some point in their life. Most prefer to feed on herbivore droppings, which are largely undigested plant matter, rather than carnivore waste, which holds very little nutritional value for insects (and really, who could blame them for that preference). Recent research at the University of Nebraska suggests dung beetles may be most attracted to omnivore excrement, since it provides both nutritional value and the right amount of odor to make it easy to find. 2.  Not All Dung Beetles Roll Their Poop When you think of a dung beetle, you probably picture a beetle pushing a ball of poop along the ground. But some dung beetles don’t bother rolling neat little dung balls at all. Instead, these coprophages stay close to their fecal finds. Aphodian dung beetles (subfamily Aphodiinae) simply live within the dung they find, often cow patties, rather than investing energy in moving it. The earth-boring dung beetles (family Geotrupidae) typically tunnel below the dung pile, making a burrow which can then be easily provisioned with poop. 3. Dung Beetles Provision Their Nests With Poop for Their Offspring When dung beetles do carry or roll the dung away, they do so primarily to feed their young. Dung beetle nests are provisioned with poop, and the female usually deposits each individual egg in its own tiny dung sausage. When the larvae emerge, they are well-supplied with food, enabling them to complete their development within the safe environment of the nest. 4. Many Dung Beetles Are Good Parents Dung beetles are one of the few groups of insects that exhibit parental care for their young. In most cases, child rearing responsibilities fall on the mother (surprise!), who constructs the nest and provisions it with food for her young. But in certain species, both parents share child care duties to some degree. In the Copris and Ontophagus dung beetles, the male and female work together to dig their nests. Certain Cephalodesmius dung beetles even mate for life. 5. Most Dung Beetles Are Particular About the Poop They’ll Eat For most dung beetles, not just any poop will do. Many dung beetles specialize on the dung of particular animals, or types of animals, and simply will not touch the poo of other critters. Australians learned this lesson the hard way, when the outback was nearly buried in cattle dung. Two hundred years ago, settlers introduced horses, sheep, and cattle to Australia, all grazing animals that were new to the native dung beetles. The Australian dung beetles were raised on poop from Down Under, like kangaroo poo, and refused to clean up after the exotic newcomers. Around 1960, Australia imported exotic dung beetles that were adapted to eating cattle dung, and things got back to normal. Phew. 6. Dung Beetles Are Really Good at Finding Poop When it comes to poop, the fresher the better (at least from the dung beetles perspective). Once a dung patty has dried out, it’s less palatable to even the most dedicated poop eater. So dung beetles move quickly when an herbivore drops a gift in the pasture. One scientist observed 4,000 dung beetles on a fresh pile of elephant scat within 15 minutes after it hit the ground, and shortly thereafter, they were joined by an additional 12,000 dung beetles. With that kind of competition, you have to move quick if you’re a dung beetle. 7. Dung Beetles Navigate Using the Milky Way With so many dung beetles vying for the same pile of poop, a beetle needs to make a quick getaway once he’s rolled his dung ball. But it’s not easy to roll a ball of poop in a straight line, especially when you’re pushing your ball from behind using your hind legs. So the first thing the dung beetle does is climb atop his sphere and orient himself. Scientists had long observed dung beetles dancing on their poo balls, and suspected they were looking for cues to help them navigate. New research confirmed that at least one species of African dung beetle, Scarabaeus satyrus, uses the Milky Way as a guide to steering its dung ball home. The researchers placed tiny hats on the dung beetles, effectively blocking their view of the heavens, and found the dung beetles could only wander aimlessly without being able to see the stars. 8. Dung Beetles Use Their Poop Balls to Cool Off Have you ever walked barefoot across a sandy beach on a scorching hot summer day? If so, you probably did your share of hopping, skipping, and running to avoid painful burns to your feet. Since dung beetles often live in similarly hot, sunny places, scientists wondered if they, too, worried about burning their tootsies. A recent study showed that dung beetles use their dung balls to cool off. Around noon, when the sun is at its peak, dung beetles will routinely climb atop their dung balls to give their feet a break from the hot ground. The scientists tried putting tiny, silicone booties on the dung beetles, and they discovered the beetles wearing shoes would take fewer breaks and push their dung balls longer than the beetles that were barefoot. Thermal imaging also showed that the dung balls were measurably cooler than the surrounding environment, probably because of their moisture content. 9. Some Dung Beetles Are Surprisingly Strong Even a small ball of fresh dung can be hefty to push, weighing 50 times the weight of the determined dung beetle. Male dung beetles need exceptional strength, not just for pushing dung balls but also for fending off male competitors. The individual strength record goes to a male Onthphagus taurus dung beetle, which pulled a load equivalent to 1,141 times its own body weight. How does this compare to human feats of strength? This would be like a 150 lb. person pulling 80 tons! 10. Millions of Years Ago, Ancient Dung Beetles Cleaned up After Prehistoric Giants Because they lack bones, insects rarely show up in the fossil record. But we do know that dung beetles existed around 30 million years ago, because paleontologists have found fossilized dung balls the size of tennis balls from that time period. Prehistoric dung beetles collected the poop of South America’s megafauna: car-sized armadillos, sloths taller than modern houses, and a peculiar long-necked herbivore called Macrauchenia.

(MACROECONOMICS) Explain why the actual budget deficit is not a good Essay

(MACROECONOMICS) Explain why the actual budget deficit is not a good indicator of the fiscal stance and suggest any other better alternatives - Essay Example Moreover, ideal and functional fiscal stance indicators should embrace in-depth analysis of fiscal policies and collective economic variables. The actual budget deficit has from time to time been used as an indicator of the fiscal stance, although various shortcomings have rendered it a rather inadequate indicator. The overall balance of a government budget is basically a measure of the difference between government expenditure and revenue. In a case where expenditure outweighs revenue, the overall balance presents an actual budget deficit, which is an indication of an expansionary fiscal stance. The actual budget deficit indicates a fiscal stance where the negative impact of revenue on an economy’s aggregate demand is far much implicative of the positive effects achieved through government spending. Gross national product of any given economy at any given time is on the receiving end as it is negatively impacted by the fiscal policies put in place by the government (International Monetary Fund, 1989, p.76). However, the measure of actual budget deficit needs to be analyzed and judged more cautiously for accurate and relevant indication of the fiscal stance. In case keen judgment and analysis of the actual budget deficit measure is compromised, it ceases to act as a good indicator for the fiscal stance with respect to other economic variables. The actual budget deficit is also regarded as deficient indicator of fiscal stance, since it only offers impacts on aggregate demand perspectives and overlooks other economic variables such as economic sustainability, monetary stance, and growth aspects. Moreover, the actual budget deficit overlooks other economic complexities such as the manner in which the deficit is financed with regards to successive impact of the country’s economic variables. Fiscal impact complexities encompass the manner in which an actual budget deficit is financed among other special measures that are put in place to

Listening Without Resistance and Systems Thinking Research Paper

Listening Without Resistance and Systems Thinking - Research Paper Example In addition, I have been judging the accent of the other party in the conversation. I have been thinking that people who have great accent are less literate. This has been making me get less keen when listening to them. Conversations I have had in the past weeks were just discussions. Discussion is listening without a desire to be changed by the conversation (Mozdzierz, 2009). A dialogue, on the other hand, is a special way of conversation in which one is willing to be influenced by the conversation (Robinson & Rose, 2007). The conversations I have had in the past weeks could not fit to be called dialogue. This is because of my behavior of choosing not to be keen when the other party in a conversation had an accent, pronunciation problem or spoke less audibly. In most cases, my actions were either partially or completely withdrawing myself from the conversation. Therefore, I have done more of discussion than dialogue. Conversations could be easily converted to dialogue using several advantage points. One of the points is completing the features of a conversation. According to Nikulin (2010), this could be done by personal voice, unfinalizability, and allosensus. Another point is asking for clarifications during the conversation. This could increase someone’s attentiveness on the conversation. As a result, the conversation would have a great influence on the person and thus converted into a dialogue. The other point is reframing the message communicated during a conversation. This could avoid negative reactions and judgments made during conversations. As a result, the conversation would have a great influence on the parties involved and thus it would have been converted to a dialogue. System thinking is one of the five disciplines defined by Senge to guide activities of a learning organization. According to Wyk (2003), system thinking could be conceptualized as a tool for making complex patterns in a learning organization much

An introduction to internationalizing Essay Example | Topics and Well Written Essays - 500 words

An introduction to internationalizing - Essay Example Having successfully established itself in the UAE, the firm must consider a target market whose needs and preferences match those of members of the UAE. In the event that the suitable market has a number of diverse groups with different preferences, the firm will need to customize its product to suit these tastes. Moreover, we need to diversify our business portfolio by engaging in business activities that go beyond the company’s current portfolio, for instance, manufacturing of less refined pottery to suit the low income earners in the target market. This will result in the development of higher market pools, therefore, enhancing the firm’s profit margins. The firm should seek areas with a high population of its target market. The global market consists of various environments such as urban and rural environments. These environments each have a distinct bureaucratic process and labor law; it is paramount to avoid markets that have excessive bureaucracy and inflexible and outdated labor laws. Dubai for instance, would be a good market option as it is strategically close to Abu Dhabi, our head office. This market is well served by modern infrastructure; hence transportation of both raw materials and finished products will be easy. Moreover, the market has high market opportunities internally and internationally as it is served by over 170 airlines and 86 shipping lines (Rehman, A.  2007, p.57). This will lead to the firm’s expansion into the international market through exportation opportunities. Moreover, this nation has suitable labor laws and bureaucratic process; it neither has corporate and income taxes nor foreign exchang e controls. In addition to this, Dubai is one of the most economically developed nations, and its population mostly consists of people leading a Cosmopolitan lifestyle, which is our most suitable target market; one that appreciates fine art. The nation is also known to hold top

Aci Financial Statement Essay Example for Free

Aci Financial Statement Essay The companies are now preparing this statement as an integral part of their financial statements. This paper examines empirically the current practices followed by sample companies in preparation of cash flow statement and concludes that the sample companies are in line (with few exceptions) with the requirements of International Accounting Standard (IAS)-7 or Bangladesh Accounting Standard (BAS)-7. It also proposes some suggestions for improving the presentation of the statement Key words: Cash flow statement, IAS/BAS, Listed Company, Disclosure. Introduction The purpose of a cash flow statement is to provide information on the cash flow from a company’s operating, investing and financing activities to enable the users of its financial statements to evaluate the ability of the company to generate cash and to use the historic cash flows to predict future cash flows. The cash flow information enhances the comparability of the operating performance by various companies, because it eliminates the effects that arise from the use of different accounting treatments for the same transactions and events. The use of cash flow information is gaining importance in the analysis of financial statements (Epstein 1991; Yap 1997; Jones and Widjaja 1998; Previts and Bricker 1994). Cashflow information is considered less open to manipulation than information on earnings, because it is based on the actual receipt and payment of cash only and not on the accrual and other accounting principles. Rees (1995:75) adds that the cash flow statement can be more informative than the other statements. However, he literature on the cash flow statement indicates that there are grey areas in cash flow reporting that are open to various interpretations (Everingham and Watson 2002). The perceived simplicity of the cash flow statement may therefore create synthetic confidence in the reliability of companies’ cash flow reporting and the comparability of various companies’ cash flow information. The acceptance of IAS-7: The Cash Flow Statement has added a new dimension to the preparation and present ation of financial statements in Bangladesh. This paper is an attempt to investigate into the state of cash flow reporting by the listed Bangladeshi * Lecturers, Department of Business Administration, ASA University Bangladesh 210 ASA University Review, Vol. 6 No. 2, July–December, 2012 Textiles and Clothing companies in general. The focus is not on the quality of the reporting of the companies but rather on what the reporting levels are in general. Objectives of the study The major objectives of the study are as follows: 1. to identify the current practice of cash flow statement of Pharmaceutical companies in Bangladesh. 2. o provide present cash flow statement format, structure and reporting on the basis of information provided in the annual reports of the selected listed Pharmaceutical companies in Bangladesh. Methodology of the study The study was conducted in accordance with secondary information obtained from various sources. The overview of standardization of financial reporting and the regulatory framework has be en based on laws, regulation, and guideline and also on various published sources of information taken from International Accounting Standard Board (IASB) and Bangladesh Accounting Standard 7 (BAS 7). A limited survey has also been made covering a total of 12 Pharmaceutical companies’ annual reports (2009) enlisted in Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE). These are selected on the basis of convenience sampling procedure. In order to make the study more revealing it also covers some research articles, textbooks, publications and web sites of various accounting bodies. Limitations of the study 1. Applied non profitability techniques have been used. 2. Due to limitation of the extensive materials, books and previous studies in Bangladesh literature review could not be extensive. 3. This study consists of only 12 listed Pharmaceutical companies due to time and resources constraints. Literature review Cash flow statement: A historical surroundings/background Cash flow Accounting (CFA) was the main system of accounting up to beginning of the 18th century (Watanabe, Izumi: The evolution of Income Accounting in Eighteenth and Nineteenth Century Britain, Osaka University of Economics, Vol. 57, No. 5, January 2007, p. 27-30). Till then, accounting allocation and profit measurement were relatively unimportant; the profit and loss account being used to close off ledger accounts at each period end. However, with the advent of concept and practices of business continuity, periodic measure and statement of financial position began to grow. Thus the basis of cash transaction becomes foundation for the allocation based systems of accounting today. Although there has been a reasonably sustained interest in fund flow statements (based on allocated accounting data) since the beginning of the twenty century, CFA appears to have received little or no support from accountants until the early 1960s. At that time there was little concern over the use of ‘cash flow’ data in the financial analysis- cash flow being interpreted as ‘profit plus depreciation (. Winjum, J. o, 1972). In 1961 AICPA recognized the importance of fund statement by publishing Accounting Research Study (ARS) Cash Flow Statement Disclosures in Pharmaceutical Companies 211 NO 2â€Å"Cash flow analysis and fund statements†. Before that, accountants had prepared funds statements primarily as management report. The Accounting Principles Board (APB) responded in October 1963 by issuing APB Opinion NO. : â€Å"the statements of and application of funds†, which recommended that a statement of sources and application of funds be presented on a supplementary basis. Because of the favorable response of the business community to this pronouncement, the APB issued Opinion No. 198: â€Å"Reporting changing in Financial Position† in March 1971. This opinion required that a statement of changing financial position be presented as a basic financial statement and be covered by the auditor’s reports. In 1981 the Financial Accounting Standard Board (FASB) reconsidered fund flow issues as part of the conceptual framework project taken in 1976. At this time the FASB decided that the cash flow reporting issues should be considered at the standard level. Subsequent deliberation resulted in Statement of Financial Accounting Standard (SFAS) No. 95: ‘Statement of cash flows’ in Nobember1987 (Weygandt, Kieso, Kimmel 1998: 1936). Fund flow statement Vs Cash flow statement Both fund flow statement and cash flow statement serve as a fundamental parts of the financial statements. In 1961, the AICPA issued ARS No. 2, â€Å"Cash Flow Analysis and the Fund Statements† which recommended that a fund statement covered by auditor’s opinion be included in companies financial reports. According to paragraph 5 of Preface to Statement of International Accounting Standard [approved by the IASC Board in November1982 for publication in January 1983 and supersedes the preface published in January 1975 (amended March 1978)], â€Å"the term ‘financial statements’ covers balance sheets, income statement or profit and loss accounts, statements of change in financial position, notes and other statements and explanatory materials which are identified as being part of financial statements† (IASC, 2000:32). As per paragraph 7 of framework for the Preparation and Presentation of Financial Statements (approved by IASC Board in April 1989 for publication in July 1989): â€Å"A complete set of financial statement normally includes a balance sheet, an income statements, a statements of change in financial position (which may be presented in a variety of ways, for example as a statement of cash flow or a statement of fund flows) and those notes and other statements and explanatory materials that are an integral part of the financial statements† (IASC : p. 3-44). As per paragraph 4 of the previous IAS 7 (October 1977), statements of change in financial position, the term ‘ funds’ referred to cash, cash and cash equivalents or working capital (IFAC, 1992: p. 813). Funds provided or used in operation of an enterprise should be presented in the statements of changes in financial statement separately from other sources and uses of fund. Unusual items, which are not part of ordinary activities of the enterprise, should be separately disclosed (IASC: Para 21). But many users of financial statements consider current practices of reporting fund flows as confusing because too much information is compressed in the statements of change in financial position, and because no single definition has been established (Mosich and Larsen, 1982; p. 935). In order to develop a conceptual framework for financial accounting and reporting, the FASB issued in December 1980 a discussion memorandum â€Å"reporting Fund flow, Liquidity and Financial Flexibility† which was issued for the following reasons: (1) for assessing future cash flow, and (2) current practices regarding the reporting of funds flow information are not entirely satisfactory. As a result of deliberation, FASB issued SFAS NO. 95 ‘Statements of Cash Flow’ in 1987. The statements require the inclusion of statements of Cash Flows rather than a statement of Change in Financial position when issuing a complete set of financial statements 212 ASA University Review, Vol. 6 No. 2, July–December, 2012 which was made effective for annual periods ending after July 15, 1988. The major requirements of the statements are of the following two areas: Basis of Presentation: The statement must focus on cash receipts and payments and must explain the change in cash plus cash equivalents. Classification of cash flows: Cash flows are to be classified according to operating, investing and financing activities. The basis of such classification is derived from the financial theory, which state that the enterprise derives the cash used for investing activities and settlement of outstanding financial obligation in an accounting period from internal and external sources. Internal cash sources emanate from the net cash generated from current operation and perhaps disinvesting and depletion of cash resources at the start of the period. External cash sources come from financing activities such as borrowing and receiving cash from the sale of equity shares to existing and new shareholders (Wallace et,al). Benefits of Cash Flow Information The information in a cash flow statement helps investors, creditors, and others to assess the following aspects of the firm’s financial position. Such statements serve as a mechanism for predicting the ability to generate future cash flows for the investors, creditors and others. This enables managers or management to plan coordinate and control financial operation in an effective manner. It gives an indication of the relationship between profitability and cash generating ability thus of the quality of the profit earned. It furnishes information to the management regarding the entities’ ability to pay dividend and meet obligations. Analyst and other users of financial information often, formally or informally, develop models to assess and compare the present value of the future cash flow of entities. Historical cash flow statements could be useful to check the accuracy of past assessment (ACCA Text book part 2. P. 324). It is free from manipulation and is not affected by subjective judgments or by accounting policies. Such a statement dictates situations when a business has made huge profit but has run out money or it has sustained loss but has enough cash availability. The extent of cash generated from operational activity and external finance in order to meet capital, tax, and dividend requirements can be obtained from such statements (Lee, T. A: 1972:27-36). It aids in the evaluation of risk, which includes both the expected variability of future return and probability of insolvency or bankruptcy ( Hendrickson, Eldom. S, 1982: 237). Such statements reveal the capability of an enterprise to pay its short obligation as and when due to the lenders. A cash flow statement in conjunction with a balance sheet provides information on liquidity, viability, and adaptability. The balance sheet is often used to obtain information on liquidity, but the information is rather incomplete for this purpose as the balance sheet is prepared at a particular point of time. Cash Flow Statement Disclosures in Pharmaceutical Companies 213 It may assists users of financial statements in making judgments on the amounts, timing and degree of certainty of future cash flows. This statement provides information that is useful in checking the accuracy of past assessment of future cash flows and in examining the relationship between profitability and net cash flow and the impact of changing price (IAS 7: Para 3 4). Information on cash flows classified by three groups of activities (Operating, investing and financing) that al low users to assess the impact of those activities on the financial position of the enterprise and the amount of its cash and cash equivalents. This information may also be to evaluate the relationship among those activities (IAS 7: Para 11). This statement is of special importance in assessing future cash flows, quality of income operating capability, financial flexibly and liquidity, and information on financing and investing activities. Using cash flows from operating activities from the cash flow statements, different ratios such as liquidity, ratio, solvency ratio, and profitability ratios can also be calculated to evaluate an enterprise’s liquidity, solvency, and profitability. Aziz uddin and Bala, 2001: p. 14) Overview of Cash flow statement The cash flow statement explains the changes that have occurred in the company’s cash and cash equivalents during the year by classifying the cash flows in its operating, investing and financing activities. The statement must focus on cash receipts and payments and must explain the change in cash plus cash equivalents. The classification is done in a way that is mos t appropriate to the company’s business. The following are the definitions of the components of the cash flow statement: Cash: cash on hand and demand deposits Cash equivalents: short term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value. Operating activities: the principal revenue-producing activities of the enterprise and other activities that are not investing or financing activities Investing activities: the acquisition and disposal of long-term assets and other investments not included in cash equivalents. Financing activities: activities that result in changes in the size and composition of the equity capital and borrowings of the enterprise (Epstein, p. 93). Objective and Scope of IAS 7 Information about the cash flow of an enterprise is useful in providing users of financial statements with a basis to assess the ability of the enterprise to generate cash and cash equivalents and the needs of the enterprise to utilize those cash flows. The economic decision taken by users requires an evaluation of the ability of an enterprise to generate cash and cash equivalents and timing and certainty of their generation. The objective of IAS 7 is to require the provision of information about the historical change in cash and cash equivalents of an enterprise by means of a cash flow statement that classifies cash flows during the period from operating, investing and financing activities. An enterprise should prepare a cash flow statement in accordance with the requirements of IAS 7 and should present it as an integral part of its financial statements for each period for which financial statements are prepared. Users of an enterprise’s financial statements are interested in how the enterprise generates and uses cash and cash equivalents. This is the case regardless of the nature of the enterprise activities and irrespective of whether cash can be viewed 214 ASA University Review, Vol. 6 No. 2, July–December, 2012 as the product of the enterprise, as may be the case with a financial institution. Enterprises need cash for the same reason however different their principal revenue- producing activities might be. They need cash to conduct their operations, to pay their obligations and to provide return to the investors. Accordingly this standard requires all enterprises to present a cash flow (Para 1 3). Presentation of Cash flow statement under IAS 7 Cash and cash equivalent: The definition of cash and cash equivalent are central to the preparation and interpretation of cash flow statements. Cash consists of cash in hand and demand deposits, coins and notes of an organization, etc. In our country deposits in postal accounts may be termed as cash (Cooper and Ijiri, 1984: 88; Ghosh, 2001). Cash equivalents are short-term, highly liquid investments that are readily convertible into known amount of cash and which are subject to an insignificant risk of change in value. According to the definitions of paragraph 6 of IAS 7 cash comprises cash in hand and demand deposits; usually ‘cash on hand’ includes currency, notes, and coin in the cash box of the enterprise. It also includes prize bond, negotiable money orders, postal orders, and under posited checks, bank drafts or pay- order. Demand deposits refer to deposits in checking accounts in banks and other financial institutions that may be withdrawn without notice usually subject to deduction of outstanding check. Thus cash equivalents – 1. are short-term investments but the ‘term’ ‘short’ not clearly specified, although a period of three months and less is suggested to be taken as short term period. 2. are highly liquid investments. Here ‘liquid’ means having in a situation where cash equivalents are available in sufficient amount to meet obligation of payments. . are investments that are both: (a) readily convertible, to known amounts of cash and (b) subject to an insignificant risk of change in value. According to SFAC No. 95, the risk categorically refers to risk of change in interest rate. The short-term investments are so near their maturity that they represent insignificant risk of changes in interest rate. Examples include treasury bills, commercial papers, a nd money market funds purchased with cash that is in excess of immediate needs. However, although by definition, cash equivalents refer to short term highly liquid investments, they are usually held for the purpose of meeting short term cash commitments rather than for other purpose. For an investment to qualify as a cash equivalent it must be readily convertible to a known amount of cash and be subject to insignificant risk of change in value. Therefore an investment normally qualifies as a cash equivalent only when it has a short maturity of, say, three months and less from the date of acquisition. Equity nvestments are excluded from the cash equivalents unless they are, in substance, cash equivalents, for example in the case of preferred share acquired within a short period of their maturity and with a specified redemption date (Para 7). Cash Flow Statement Disclosures in Pharmaceutical Companies 215 Preparation of Cash flow statements IAS 7 requires cash flows to be classified into operating, investing, and financing activities. Example of cash flows by cate gory Operating Activities Inflows Receipts from customers Outflows Payments to suppliers Advance deposits from customers Wages and salaries to employees Income tax refunds Income tax payments Interest received on customers’ notes or Other tax payments accounts Dividends and interest received from Interest paid on bank debt or bonds outstanding and investments and included in determining net included in determining net income income Investing Activities Cash received from sale of capital assets Payments for purchase of capital assets Cash from sale of debt or equity investments Cash flows capitalized as intangible assets, such as:  · development costs  · start-up costs  · capitalized interest  · exploration Costs Collection of principal on loans to others Purchase of debt or equity securities of others Interest and dividends received on investments Loans extended to others and not included in determining net income Financing Activities Net proceed of issuing debt or equity securities Payment of principal on bonds or bank loans Cash proceeds received from ba nk loans Purchase of the entity’s own shares Interest paid on bank debt or bonds outstanding and not included in determining net income Dividends paid to shareholders Variations in Reporting activities for Cash flows A. Operating or Financing activities Transactions with different categories included in cash flows are classified in a different manner. According to IAS 7, Para 12, â€Å"A single transaction may include cash flows that are classified differently. For example, when the cash repayment of a loan includes both interest and capital the interest element may be classified as operating activities and the capital amount is classified as financing activities†. B. Operating or investing and financing activities Some cash flows may be classified as arising from any activities such as ‘interest’, ‘dividend’ ‘income tax’. The detailed provisions of these types are as follows. 216 ASA University Review, Vol. 6 No. 2, July–December, 2012 Interest: a. For a financial institution, interest paid and interest received are usually classified as operating cash flows (para 33). b. For other enterprise, interest paid and interest received may be classified as operating cash flows because they enter into the determination of net profit or loss. Alternatively, interest paid may be classified as financing cash flows, because they are costs of obtaining financial resources. Interest received may be classified as investing cash flows, because they are returns on investments (para 33). Dividend: a. For a financial institution, dividends received are usually classified as operating cash flow (Para 33). b. For other enterprise, dividends received may be classified as operating cash flows because they enter into the determination of net profit or loss. Alternatively dividend received may be classified as investing cash flows, because they are returns on investments (para 33). c. Dividend paid may be classified as financing cash flows, because they are costs of obtaining financial resources. Alternatively dividend paid may be classified as component of cash flows from operating activities in order to assist users to determine the ability of an enterprise to pay dividend out of operating cash flows (para 34). Income tax: a. Taxes on income arise on a transaction that gives to the cash flows that are classified as operating, investing, and financing activities in cash flow statement. While tax expense may be readily identifiable with investing or financing activities, the related tax cash flows are often impracticable to identify and may arise in a different period from the cash flows of the underlying transactions. Therefore taxes paid are usually classified as cash flows from operating activities. However, often it is practicable to identify the tax cash flow within individual transaction that gives rise to cash flows that are classified as investing or financing activity as appropriate. When tax cash flows are allocated over more than one class of activity, the total amount of taxes paid is disclosed (Para 36). In the light of SFAS 95, â€Å"Transaction that enter into the determination of net income† are defined as operating activities and hence, interest received or paid, dividend received and taxes on income are rigidly treated to arise from operating activities. Dividend to stakeholders are treated as cash outflows classified as financing activities (Keiso and Weygandt, 1998: 1275-76) Cash flow statement Practices in Bangladesh Regulatory Framework, in the eyes of the Companies Act 1994 (Act no. 18 of 1994): According to Section 183 of the Companies’ Act 1994 (which came into effect from 1 January 1995), a company is required to present balance sheet, profit and loss account (income and expenditure account, in case of non profit companies). Under section 185, the balance sheet and the income statement have to be prepared according to the forms set out in Part –1 and Part –2 of Schedule XI respectively under which information on consecutive two years (concerned year and Cash Flow Statement Disclosures in Pharmaceutical Companies 217 preceding year) are to be provided. However according to note (g) of the general instruction for preparation of balance sheet (given in part –1 of schedule XI after the horizontal format of the balance sheet), â€Å"a statement of change in financial position shall be included as an integral part of the financial statements, and shall be presented for each period for which the profit and loss account is prepared†. However no specific format of cash flow statement has been prescribed in Companies Act 1994. In the light of the Security and Exchange Rule 1987 (S. R. O No. 237-l/87 dated on 28 September 1987): Under the provision of rule 12 (1) of the Securities and Exchanges Rules (SER) 1987(amended by the section notification No. SEC/ Section 7/SER/03/132 dated 22 october1997 published in the official gazette on 29 December 1997), the annual report to be furnished by an issuer of listed security shall include â€Å"a balance sheet, profit and loss account, cash flow statement and notes to the accounts collectively hereinafter referred to as the financial statement’. In the part III of the Schedule of the SER 1987, issues relating to interest paid on short-term borrowing, interest and dividend received income taxes are clearly guidelined. For example, interest paid on short-term borrowing shall be a cash outflow under operating activities; ‘interest and dividend received’ shall be a cash inflow under investing activities. And ‘interest paid on long term borrowing’ and ‘dividend paid’ shall be a cash outflow under financing activities. Under paragraph 35-36, ‘taxes on income’ should be treated as operating cash outflow unless they can be identified in financing and investing activities. Findings of the study To know the extent of cash flows statement reporting practices by Pharmaceutical companies, a survey has been conducted covering twelve annual reports (2009) (For detailed the name of the companies see Appendix-1). The major findings of the study are given below in terms of general variations in reporting and voluntary disclosure. General findings It includes the current format and structure of cash flow statement and the extent of compliance of IAS-7, followed by sample Pharmaceutical Companies in Bangladesh. All the sample companies prepare cash flow statement as required by IAS-7/BAS 7 adopted by the Institute of Chartered Accountant of Bangladesh and present it as an integral part of the financial statements. Notes to cash flow statement have been presented as part of the financial statements i n case of all the sample companies.  · The sample companies prepare cash flow statement in vertical form and shows figure of cash flows of the current year and the previous year.  · All the sample companies’ cash flow statement contains a classification of operational, investing, and financing activities.  · The sample companies did not illustrate the policy dopted in determining the formulation of cash and cash equivalents although this is required by paragraph 36 of IAS 7. 218 ASA University Review, Vol. 6 No. 2, July–December, 2012 Variation in Reporting Another objective of the survey was to determine which alternatives, permitted by IAS-7, are used most in practice by Bangladeshi pharmaceutical companies. It is found that there are not many differences between companies in their reporting of cash flow information. This is expected because the preparation of cash flow statement does not allow for many choices, differences of interpretation or different accoun ting treatments. The results are set out in table 1. Table-1 Variations in reporting [Cash flow statement (CFS)] Factors 1 Notes to CFS Options Separately, following the CFS Part of the notes to the financial statements Incorporated in the CFS Total Direct method Indirect method Total Operating activities or no interest Financing Investing activities Total Financing activities or no dividends Operating activities Investing activities Total Part of accounting policy note Nothing disclosed Total Operating activities or no tax Financing activities Investing activities Total Number of companies 0 12 0 12 12 0 12 12 0 0 12 12 0 0 12 12 0 12 12 0 0 12 2 Operating activities 3 Interest received and Interest paid 4 Dividend received and Dividend paid 5 Definition of cash and cash equivalents 6 Income tax Notes to table 1  · Refer to point 2 of Table 1. According to IAS-7 and SEC Rule 1987, the enterprises are encouraged to report cash flows from operating activities using the direct method. The direct method provides information which may be useful in estimating future cash flows which is not available under the indirect method. All the sample companies followed the direct method in reporting operating cash flows. One company (Pharmaceutical Mithun Knitting Dyeing Ltd. ) discloses cash flows from operating activities under indirect method in notes of financial statements as additional information. Cash Flow Statement Disclosures in Pharmaceutical Companies  ·  · 219 Refer to points 3 4 of Table 1. All the companies studied have shown ‘interest received and paid’ under operating activities and ‘interest paid on long term borrowing’ and ‘dividend paid’ under financing activities. Refer to points 5 6 of Table 1. All the companies studied have shown â€Å"definition of cash and cash equivalents† in the notes of accounting policy and â€Å"income tax† under operating activities. Voluntary disclosure The survey also included an examination of any additional information that is disclosed regarding the company’s cash flow which is not required by IAS-7, but which may be helpful to the user. For example, separate disclosure of cash flows increases operating capacity and cash flows that maintain operating capacity, disclosure of segmental cash flows, cash flow per share etc. The survey found no company to disclose such additional voluntary information in its cash flow statement. Conclusion and Recommendation A materially misstated cash flow statement, whether it is in terms of incorrect classification in the categories or numerical accuracy, can be misleading to the user and can lead to wrong decisions taken by the users of the statement. The survey has revealed that although sample companies prepare cash flow statement according to International Accounting Standard-7 (BAS-7), there is also a degree of non-compliance. It is, however, found that there are not many differences between companies in their reporting of cash flow information. This is expected because the preparation of cash flow statement does not allow for many choices, differences of interpretation or different accounting treatments. To make cash flow statement more informative and useful for users, the companies should disclose additional voluntary information such as cash flow per share in their cash flow statements. Items consisting of cash flows from operating, investing and financing activities should also be clarified in the notes of the financial statements. Due to the limited scope of the present study, a large number of research issues have not been attempted but are identified in the course of the study. Disclosure practices of additional items other than operating, investing and financing activities, disclosure practices differences between listed and unlisted companies, disclosure practices differences between financial and other institutions are some such potential issues for future research. 220 ASA University Review, Vol. 6 No. 2, July–December, 2012 References Annual Reports of Sample Pharmaceutical Companies Listed in Dhaka Stock Exchange and Chittagong Stock Exchange 2009. Aziz Uddin, A. B. M and Bala. , S. K. ( 2001), â€Å"Cash Flow Reporting in Bangladesh†, The Cost Management, Nov- Dec. ICMAB, p. 13. FASB Discussion Memorandum (1980), Reporting Funds Flow, Liquidity and Financial Flexibility, FASB, Stanford. Thomas H. Beechy. Joan E. D. Conrod, Intermediate Accounting, second Edition, Chpter 5, Exhibit 5-1 pp. 91 Ghosh, Santi N. (2001),â€Å"Workshop Material on IAS # 7 : Cash Flow Statements† compiled under the Institute of Chartered Accountants of Bangladesh (ICAB)Project, Development of Accounting and Auditing Standards in Bangladesh, The World Bank. Government of Bangladesh (GOB) (1994), The Companies Act 1994 (Act No. 18 of 1994). Gup, B. E. Samson, W. D. 1993. An analysis of patterns from the statement of cash flows. Financial Practice Education, 3(2):73-79. Hendrickson, Eldom. S(1982), Accounting Theory, Richard D. Irwin, Inc. , Illinois, p. 236. Hertenstein, J. McKinnon, S. 1997. Solving the puzzle of the cash flow statement. Business Horizons, 40(1):69-76. International Accounting Standards Committee (IASC) (2000), International Accounting Standards 2000 International Accounting Standards Committee, London, â€Å"International Accounting Standard IAS 7 (revised 1992): Cash Flow Statements† in pp. 139165. International Federation of Accounting (IFAC) (1992), IFAC Handbook 1992: Technical Pronouncements (New York: IFAC). â€Å"IAS 7 (October 1977): Statement of Changes in Financial Position† in pp. 812- 816. Khan, M. H. Akter, M. S. Ghosh, S. K (2005), â€Å"Cash Flow Statement Disclosures: A Study of Banking Companies in Bangladesh†. Available at www. pcte. edu. in/site/OJMR/Finance/cashflow. pdf Keiso, Donald, E. and Jerry. J. Weygandt (1998), Intermediate Accounting, John Wiley Sons, Inc. New York, 9th Edition, pp. 1275-76. Lee, T. A. 1982. Cash flow accounting and the allocation problem. Journal of Business Finance Accounting, 9(3):341-352. Lee, T. A (1972), â€Å"A Case for Cash Flow Reporting†, Journal of Business Finance, Vol. 4, No. 2, pp. 27-36 as quoted in Studies of Accounting Theory, Steyn, B. W. Hamman, W. D. 2003. Cash flow reporting: are listed companies complying with AC 118? Meditari, 11:167-180. Weygandt, Kieso, Kimmel, Accounting Principles, 9th edition, John, Wilely and Sons, Inc, pp. 732-733 Wallace, R. S. O. and Choudhury, M. S. I. And Pendelbary, M. 1997), â€Å"Cash Flow Statements: An International Comparison of Regulatory Positions†, The International Journal of Accounting, Vol. 32, No, 1, pp. 1-22 Cash Flow Statement Disclosures in Pharmaceutical Companies 221 Appendix-1 List of the twelve Pharmaceutical companies studied. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Gla xcoSmithKline Bangladesh Limited (2009) The IBN SINA Pharmaceutical Industry Ltd. (2009) BEXIMCO PHARMACEUTICAL LTD. (2009) ORION INFUSION LTD. (2009) ACI Formulation Limited (2009) Ambee Pharmaceutical Limited (2009) Square Pharmaceutical Ltd. (2009) Libra Infusions Limited (2009) BEACOM Pharmaceuticals Limited (2009) Rahman Chemicals Limited (2009) Renata Limited (2009) Therapeutics (Bangladesh) Limited (2009)