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Accounting in ERP Systems
differences between the two standards, thereby enabling companies to easily transition
to IFRS.
An ERP system can help companies adopt IFRS because the financial modules of
ERP systems are capable of reporting on multiple standards. Many companies will be
reporting their financials under IFRS and at the same time reporting for local tax
purposes under a different standard (in this case U.S. GAAP). ERP systems can handle
the parallel requirements for filing financial records. 135
Question:

1. Using the Internet, find an article describing a U.S. company’s transition from
U.S. GAAP to IFRS. How can an ERP system help ease the transition for
organizations?

Intercompany Transactions
Transactions that occur between a parent company and one of its subsidiaries (or between
different subsidiaries), known as intercompany transactions, must be eliminated from the
books of the parent company because the transaction does not represent any transfer of
funds into or out of the company.
As an example, suppose that Acme Inc. owns Bennett Manufacturing, and Bennett
sells raw materials to Acme for $1 million. Acme then uses the materials to make its
product. Bennett’s sale to Acme is Acme’s cost of sales. From the point of view of an
outsider, money has merely passed from one part of the consolidated company to another.
A company cannot make a profit by selling to itself.
Companies often do business with their subsidiaries, and for such companies,
intercompany transactions occur frequently. Keeping track of those transactions and
making the adjustments can be a challenge for accountants.

ANOTHER LOOK

Spreadsheets: A Poor Substitute

Many users of information technology feel comfortable using spreadsheets such as Excel
to do large data analysis and reporting projects. And, as Nick Gomersall (a specialist in
ERP and accounting systems at The GL Company) notes, it is easy to form a link
between a company’s ERP system and a personal computer through which an end user
can download ERP transaction data into a spreadsheet. These spreadsheets are often
used for data analysis and reporting instead of the built-in reporting functionality of the
ERP system or its Business Intelligence (BI) tools because these reporting tools are new
and sometimes challenging to learn. These “rogue” spreadsheets can create considerable
risk for a company in terms of lack of consistency, reliability, and control. For instance,
a study by the accounting firm KPMG, found that when spreadsheets contained more
(continued)

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