Defining Reporting Dimensions
Multitude of these legal and operational structures clubbed with accounting and reporting needs give rise to many reporting dimensions at which the organization may want to track or report its operational metrics and financial results. This is where business dimensions play a vital role.
Multitude of these legal and operational structures clubbed with accounting and reporting needs give rise to many reporting dimensions at which the organization may want to track or report its operational metrics and financial results. This is where business dimensions play a vital role.
Business Dimensions:
A dimension reflects the attributes of a business, such as legal structure, management structure, departments and projects. Dimensions are used to help capture and analyze underlying data and when used with reporting provides an effective tool to break down key components of business to help make better business decisions. Business dimensions describe the business-specific objects within the model, such as products, customers, regions, employees, and so on.
Why we need business dimensions:
In any typical entity, accounting process starts with recording of a transaction that has a financial implication on a voucher and it culminates with the preparation of final books of accounts. However this simple process gains complexity when the size of the organization and diversity of its environment increases. For example: Global companies regularly distribute goods from a central site to customers located in different countries or regions. Before shipping lo a customer, goods may be processed through a separate operating unit or subsidiary in the country of sales origin. A complex sequence of coupled accounting records is needed because these transactions impact multiple organizations and legal entities, and most governments require a financial record for transactions conducted between legal entities. Management need to contemplate these business dimensions properly for decision-making and enhancing the achievement of the competitive advantage and control over the operations of the enterprise.
- There exist various types of entities or business units which are part of the same global group.
- These units may represent countries, locations, businesses, functions, projects, cost centers, segments etc.
- These units may have different reporting needs.
- These units may be responsible for their own profit and loss.
- They might be holding their own Fixed Assets.
- They might be concerned with their own markets where their products are sold.
- They might be constituted as separate legal entities over multiple layers of ownership with their peculiar independent local statutory reporting needs.
- Subsidiaries and branches operating as individual entities need to be consolidated with the group financials.
Examples of different dimensions are:
- Legal Entity: Financial results and trial balance at each legal entity level
- Division/Department: Financial results and trial balance at each division or department
- Product Line: Operating margins for each product line
- Geography: Annual Growth for each geography in which a company operates
- Project: Cost and profitability for each project undertaken by business
- Cost Center: Costs accumulated and allocated through each cost center
- Accounts: Total fixed assets owned by the legal entity, accounted under land and building, furniture and fixtures and other accounts
- Functional Area: Total cost attributable to each function like finance, marketing etc.
These dimensions further have parent child relationships within themselves and other corporate relationships (known as Business Hierarchies) with other dimensions. Corporate relationships are the links between various dimensions like parent companies, subsidiaries, headquarters, branches, functions, product lines, cost centers etc. A dimension may consists of one or more hierarchies that can contain several levels.
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