Measuring the function of accounting information and accounting information system at Barratt Development
Abstraction
Accounting information and accounting information systems ( AIS ) in today ‘s information age drama critical functions in easing decision-makers with accurate fiscal position of the organisation and activities to prosecute strategic aims. Accountants, who are the propagators of accounting information, demand to guarantee that the information provided to decision-makers such as directors, executives and board of managers is up-to-date to accomplish organisational aims, proctor public presentation and/or amend strategic aims when needed. Sometimes accounting information is non as utile and even impacts negatively on the users. This is due to a host of issues that plague accounting information and its systems including genuineness, unity and quality of the information generated. For these grounds, companies have to develop and keep accounting information systems congruent with their concern aims to guarantee usefulness, unity and transparence to avoid ethical, legal and concern struggles. In the undermentioned rating, the research worker shall show the function of accounting information and accounting information system at Barratt Development Plc, with particular accent on how the execution of computerized accounting information systems affects issues of quality, unity and dependability.
Barratt Development – Overview
Barratt is one of the UK ‘s largest home-builders. Founded in 1958, the company today has an extended growth web of divisions spread throughout the UK. The comprehensiveness and range of Barratt’s organisational construction can be measured by the figure of resources and other open uping undertakings development it serves to the communities. The company boasts market portion with specialisation in “ making high quality, value for money places for sale, rent and shared ownership, frequently in partnership with local governments, lodging associations and others ” ( Official Website 2007 ) . The bulk, that is 80 % , of the undertakings, are based on brown field recycled land. This committedness towards sustainable development has been congruent with the Government ‘s hereafter program in sustainable development and invention in homebuilding and building ( Official Website 2007 ) .
Even though the company has been founded since four decennaries, it is turning at an unprecedented velocity. Since its listing in the London Stock Exchange in 1968, Barratt Development Plc has achieved high turnover. For the twelvemonth 2006, the company has had a group turnover of ?2,431m. With 33 runing divisions throughout the state to function all sectors of the market, Barratt is considered one of the most powerful groups of builders in planning and development of the state ‘s lodging sector ( Official Website 2007 ) .
Harmonizing to its executives, Barratt ‘s success lies in its geographical spread and extended merchandise scope. The company has ever ensured that gross revenues of its places and edifices are congruous with the mean market topographic point to appeal to a assortment of purchasers, yet maintains quality throughout the undertaking. In add-on, Barratt does non believe in staying dead and following other participants. Alternatively, portion of its success lies in its ability to turn through invention, and utilizing green engineerings efficaciously to develop undertakings that cost less, have more valuable benefits to the client and environment, every bit good as customized to the terminal user ‘s penchants. Problems such as energy efficiency, wellness and safety, and regeneration are taken into consideration earnestly ( Annual Report 2006 ) . With a strong squad of specializers on its manus, Barratt ‘s direction is confident in its public presentation and in making value for its stockholders and stakeholders.
Role of Accounting Information and AIS at Barratt Development
The outgrowth of the digital economic system and globalisation has precipitated the construct of organisational systems for pull offing cognition and information. In the fiscal context, digitized information coverage has become a nexus between the different units of the organisation. It is through this web of information that organisations are able to use information in individualised direction. Accounting information systems are enablers of information proviso to synthesise fiscal information such as studies for non-standard managerial determinations. The AIS has come to be the director ‘s cognition through which the organisation deploys cognition for assorted intents in determination models ( Bhimani 2003 ) . Therefore, AIS can be defined as a subsystem of the organisation ‘s information system in which quantitative informations are processed to supply information for persons or group of people with similar information demands, to utilize in understanding organisational activities and support decision-making. Accounting information refers to processed informations converted into information for the intent of decision-making ( OpenLearning ) .
This political orientation can be exemplified by analyzing Barratt Development and its AIS. Accounting information at Barratt serves assorted groups of persons and chiefly those who are in direct relation with the concern. From the top of the determination tree, the board of managers who need to direct and command the organisation are the chief users of accounting information. Accounting information is used to analyze the tendency in grosss, pre-tax net income, losingss, group activities, hard currency flow, return on capital employed, frontward order book, land, net assets, involvement rates, selling monetary value, volume of concern, merchandise sale and net incomes per portion to gauge the position of the concern. They base their appraisal on future programs, the types of undertaking they will concentrate on, the sort of resources they plan to use, and the sort of hazards involved in the concern ( Annual Report 2006 ) .
Apart from the board of managers, accounting information provides valuable information for monitoring intents for external groups of persons such as the scrutinizing commission. They study the unity of the fiscal statements to objectively measure its relation with the organisational public presentation. They are besides responsible for analyzing the fiscal direction and coverage system to guarantee that accounting processs, system of control and procedures are congruous with criterions prescribed by the regulators ( Annual Report 2006 ) . The accounting information besides provides utile position of the sort of recognition minutess that have taken topographic point with providers, the footings for refund and how much debt the company is in without put on the lining the company ‘s unity.
After the Board of Directors, the hearers, and the creditors, the executives and directors are the 1s who make usage of the accounting information. They utilize make usage of accounting information for measuring operational public presentation and how to better it through strategic programs. Accounting information provides insight refering to the spreads or jobs built-in in the accomplishments, resources, and fiscal constrains that hinder the maximization of efficiency of resources to accomplish organisational aims and marks ( Annual Report 2006 ) .
External users of accounting information besides include the stockholders and speculators who are keen on analyzing the public presentation of the company from clip to clip to safeguard their involvements. Information refering to net incomes per portion, portion pricing, profitableness, rates of returns and proclamation of new portions being floated are all utile for stockholders to do investing determinations.
Apart from the above-named nucleus decision-makers, accounting information is besides used at the operational degree for information like wages, benefits, fillips, pension benefits, every bit good as guaranting that divisional leaders are able to estimate the position of stock list, receivables, hard currency flow activities, assets, land, payables and revenue enhancements etc. which will impact on the overall position of the undertakings.
The accounting information that these persons utilize is processed by an accounting information system, which generates information from day-to-day minutess such as sale grosss, bills, payment faux pass, revenue enhancement signifiers, salary faux pass, providers transactional faux pass, and trade receivables etc. The AIS comprises of sub-sub systems set up based on accounting criterions such as stock list system, supply concatenation system, gross revenues returns systems, human resource system, and capital investing systems. The AIS is besides formed based on assorted internal minutess recorded in these systems. Hence, the AIS at Barratt Development is based on both internal and external accounting information processing.
Accounting Information Strategy at Barratt Development
Although AIS has been in being in organisations since the innovation of accounting, today it is interpreted synonymously with the cybernation of accounting map. The cardinal intent of AIS is to roll up, record and procedure informations from activities related to the organisations ( Stefanou 2006 ) . The attendant information has deductions in care, determination and communicating by internal and external stakeholders, depending on the extent of the impact of environmental factors, societal factors, technological factors and organisational factors. Harmonizing to Stefanou ( 2006 ) , accounting information and AIS are critical for organisations to react to extremely competitory and dynamic concern environments that frequently alter production procedures and organisational constructions. For this intent, information systems such as AIS play an of import function in easing alteration direction and let cross-functional demands.
At Barratt, the company has engaged Weber Shandwick Square Mile as the fiscal PR advisers to develop a communicating model particularly designed for supplying information to its stockholders and stakeholders at all times. However, this measure towards transparence is limited by the company ‘s policy non to unwrap sensitive fiscal information to the populace without the uttered blessing of the Company Secretary. The company believes that this scheme helps it to guarantee that cardinal accounting information is merely communicated to those truly concerned such as investors, private stockholders and analysts ( Annual Report 2006 ) .
Barratt ‘s AIS is based on the International Financial Reporting Standards, complies with the Companies Act of 1985 and uses the by and large accepted accounting rules. Under GAAP, the company besides has to include estimations and premises that affect the company ‘s overall fiscal public presentation, particularly on assets and liabilities, while coverage of grosss and disbursals. Accounting information is based on the direction ‘s reading of sum, activities, actions and actual/estimates and their impact on the public presentation of the company. For this intent, Barratt takes into history of results/estimates from keeping companies, every bit good as its subordinates, to be included in it fiscal statements to enter gross, expenditures, assets, liabilities, and hard currency flows. For illustration, when sing cost appraisal, the company includes stuffs, labor and operating expenses of work in advancement. Similarly, when sing belongings, works and equipment, the company includes deferred purchase recognition footings and costs, less depreciation of the assets ( Annual Report 2006 ) . Developing and pull offing accounting information is critical for inter and intra organisational information airing. Accurate information is required for determination support throughout the organisation, every bit good as to guarantee that the quality of information supports efficiency of operational activities. By utilizing the GAAP rules, the company ‘s decision-makers are able to negociate and pull off costs for finding cost monetary value, selling monetary value and service monetary value of its merchandises in the market. It is besides critical for the decision-makers at the divisional degree to estimate the fiscal deductions of the undertaking undertaken and, therefore, find its value to the overall organisational scheme. In smaller companies, it is easier to stress on control mechanisms such as hard currency, supervising public presentation and keeping relationships with external entities ( Collis and Jarvis 2002 ) . However, in an organisation such as Barratt, where keeping companies, subordinates, supply concatenation and such external value concatenation units are connected with the company ‘s operations, accounting estimations, though give a unsmooth image of the fiscal position, do non truly supply right fiscal position ( Ramos 2004 ) .
Furthermore, due to the altering concern environment and tendency, traditional impressions of control systems no longer turn out effectual in understanding and commanding factors that affect organisations. Bhimani ( 2003 ) is of the position that direction operational schemes nowadays require a balance of all units within the organisational model linked by an effectual communicating web, which emphasize on information and cognition transportation. Any information system must ease information for monitoring and rating of the cognition. Boland ( 1999 ) excessively is of the position that information systems such as the AIS must be present in the organisation to make studies, support study regeneration, support determination systems, smoothen work flow and supply enquiry map. Therefore, the AIS should stand for the organisational control system ( Stuerke 2005 ) . To get down with, Barratt maintains an effectual fiscal information system that provides relevant and up-to-date information pertaining to the organisation for the intent of keeping investing dealingss. One can non deny the fact that information refering to net incomes prognosiss, capital returns, proclamations, fiscal public presentation and the similar are easy available at the chink of a button at Barratt ‘s investor dealingss web site. The intent of this web site is to smooth the work flow of the investors, bargainers and analysts so that they engage in trading Barratt ‘s portions and securities ( Barratt Official Website 2007 ) .
Similarly, one observes that Barratt has used its fiscal information system to efficaciously direct and command its corporate administration through which it sets criterions and values for keeping its relationship with stockholders, clients, staff, providers, contractors and stakeholders. It is through its corporate administration scheme that the company is able to develop an operational program, budget, fiscal statements, make up one’s mind on undertakings, behavior acquisition and disposal of units, every bit good as proctor concern public presentation, set internal control for hazard direction and guarantee transparence is existing throughout the organisation ( Annual Report 2006 ) .
An effectual information system is dependent on a regulative organic structure. It is this organic structure that proctors and evaluates the efficaciousness of the execution of policies and schemes. Keeping an information system with sensitive information, such as fiscal informations, is useless if there are no regular cheques and balances. In a fiscal context, this is normally carried out by the hearers. Congruent to the comprehensiveness and size of the company, Barratt has two groups of hearers – internal and external. The Audit Committee ( internal ) comprises of executive managers with fiscal experience who are responsible for supervising the effectivity of the audit procedure, fiscal direction and describing systems, every bit good as guaranting the unity and effectivity of its accounting procedures. The internal control systems are reviewed on a regular basis to supervise possible hazards or disagreements in the audit map. An external auditing company, PricewaterhouseCoopers LLC has been engaged to authenticate the cogency of the internal audit commission ‘s studies ( Annual Report 2006 ) . This attack is non new in footings of company ‘s rating and monitoring.
Apart from the scrutinizing commission, Barratt ‘s Directors are besides responsible for safeguarding the company ‘s assets by supervising for fraud and abnormalities in its fiscal system and operations. Their undertaking is governed by an internal control and hazard direction system. Although, this system may look effectual in specifying hazard control operations and coverage, nevertheless it is normally limited by the authorization of the same managers who report, evaluate and audit the fiscal information disseminated at interim and one-year meetings. The managers are a choice group who are made responsible for the transparence of the whole company ‘s accounting system. For illustration, when sing issues of land viability for acquisition, work in advancement, and sub-contractor payments etc. , the executive managers are dependent on the “ input ” system, which is controlled at the divisional degree. Accounting of purchases, gross revenues, and acquisitions is authenticated by the divisional caputs, while the executive managers are dependent on these divisional units for hallmark of their ain coverage. Consequently, the research worker is of the position that the system merely provides sensible confidence. The hazard of deceitful activities can non be truly assured at all degrees as the cheques and balances are limited to the top executives merely.
Decision
& A ; gt ; From the above treatment, one understands that although the digital economic system has well revolutionized accounting information systems, it is basically based on the same model. Traditional accounting values such as unity, genuineness and quality of information for the intent of decision-making critically have remained the same. All procedures in entering and treating accounting informations for bring forthing information serve the intent of answerability and hallmark of the factors of production, work in advancement and public presentation of the house. What has changed is the significance of the AIS as the intra and inter communicating model for stakeholders and stockholders. This is apparent from the above survey of Barratt Development, one of UK ‘s top homebuilder companies. Barratt, based on its operational substructure, has developed a complex fiscal information system governed by policies, processs and subjects for regulating it. Its direction has appointed top decision-makers ( its managers ) as “ gatekeepers ” for monitoring, measuring and guardianship of fiscal information. It has adopted standardised accounting rules for coverage and answerability so as to ease its stockholders and stakeholders with easy-to-access accounting information for doing determinations that affect the company. However, if one analyzes this accounting system, it is filled with spreads, which may compromise the unity and quality of information provided to its users. Consequently, the research worker is of the position that AIS can non vouch genuineness, quality and unity of information, irrespective of the sort of system adopted. What is needed is a cheque and balance system integrated, congruent with the AIS, at all degrees of the organisation to guarantee independent hallmark of information and cognition direction.
Bibliography
Barratt Official Website. Company Profile. Online accessed on 20 January 2007 from: hypertext transfer protocol: //www.barratt-investor-relations.co.uk/corporateoverview/companyprofile.aspx
Barratt Report and Accounts 2006.
Bhimani, A. ( 2003 )Management Accounting in the Digital Economy. Oxford University Press: Oxford.
Boland, R. J. ( 1999 ) “ Accounting as a Representational Craft Lessons for Research on Information Systems ” inRethinking Management Information Systems: An Interdisciplinary Perspective,Currie, W. and Galliers, B. ( explosive detection systems ) Oxford University Press: Oxford. pp. 229
Collis, J. and Jarvis, R. ( 2002 ) Financial Information and the Management of Small Private Companies.Journal of Small Business and Enterprise Development, Vol. 9, No. 2 pp.100-110
Ramos, M. M. ( 2004 ) Interaction between direction accounting and supply concatenation direction.Supply Chain Management: An International Journal. Vol.9, No. 2, pp.134-138
Stuerke, P. S. ( 2005 ) Financial analysts as users of accounting information.International Journal of Managerial FinanceVol. 1 No. 1, pp. 8-24
Bibliography
Barratt Report and Accounts 2006.
Barratt Official Website. Company Profile. Online accessed on 20 January 2007 from: hypertext transfer protocol: //www.barratt-investor-relations.co.uk/corporateoverview/companyprofile.aspx
Bhimani, A. ( 2003 ) Management Accounting in the Digital Economy. Oxford University Press: Oxford.
Boland, R. J. ( 1999 ) “ Accounting as a Representational Craft Lessons for Research on Information Systems ” in Rethinking Management Information Systems: An Interdisciplinary Perspective, Currie, W. and Galliers, B. ( explosive detection systems ) Oxford University Press: Oxford. pp. 229
Ramos, M. M. ( 2004 ) Interaction between direction accounting and supply concatenation direction. Supply Chain Management: An International Journal. Vol.9, No. 2, pp.134-138
Collis, J. and Jarvis, R. ( 2002 ) Financial Information and the Management of Small Private Companies. Journal of Small Business and Enterprise Development, Vol. 9, No. 2 pp.100-110
Stuerke, P. S. ( 2005 ) Financial analysts as users of accounting information. International Journal of Managerial Finance Vol. 1 No. 1, pp. 8-24
