Determine the Difference Between Internal and External Reporting © Dale R. Geiger 20111

What Do Accountants Do? © Dale R. Geiger 20112

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 20113

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 20114

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 20115

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 20116

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 20117

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 20118

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 20119

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

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

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

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

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

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

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

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

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

Consistent Combat Ship 16" guns cruise missiles landing gates periscope ballistic missiles flight deck submersible hull helicopter pad torpedo tubes © Dale R. Geiger

Check on Learning Which characteristic requires timely information? Which characteristic requires verifiable information? Why would users demand consistency? © Dale R. Geiger

Two Sides of the Same Coin required compliance structured audit stable consistency & comparability purpose goal methodology test dynamics user need needed learning customized use responsive continuous improvement external reporting managerial costing © Dale R. Geiger

Two Sides of the Same Coin external reporting managerial costing © Dale R. Geiger

Two Sides of the Same Coin external reporting managerial costing © Dale R. Geiger

Two Sides of the Same Coin external reporting managerial costing © Dale R. Geiger

Two Sides of the Same Coin external reporting managerial costing © Dale R. Geiger

Two Sides of the Same Coin external reporting managerial costing © Dale R. Geiger

Two Sides of the Same Coin external reporting managerial costing © Dale R. Geiger

Example External Report: Tax Return Why? How? Test of success? Dynamics? Internal Report: Checkbook Why? How? Test of success? Dynamics? © Dale R. Geiger

Research: System Uses at 59 Federal Organizations © Dale R. Geiger

Research: System Uses at 59 Federal Organizations © Dale R. Geiger

Research: System Uses at 59 Federal Organizations © Dale R. Geiger

Research: System Uses at 59 Federal Organizations © Dale R. Geiger

Research: System Uses at 59 Federal Organizations © Dale R. Geiger

Research: System Uses at 59 Federal Organizations © Dale R. Geiger

Research: System Uses at 59 Federal Organizations © Dale R. Geiger

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

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

Unit Cost Report © Dale R. Geiger

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

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

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

Conclusion Needs for internal cost information are as varied as the organizations themselves External cost reports: Facilitate comparison of organizations by external users Are unlikely to meet internal management information needs © Dale R. Geiger