23-1 Prepared by Coby Harmon University of California, Santa Barbara Intermediate Accounting.
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Transcript of Chapter 15-1 Prepared by Coby Harmon University of California, Santa Barbara Westmont College...
Chapter 15-1
Prepared by Coby Harmon University of California, Santa BarbaraWestmont College
Prepared by Coby Harmon University of California, Santa Barbara
Westmont College
SECOND EDITION
Chapter 15-2
IT Infrastructure for E-Business
Chapter 15-3
1. The overview of an ERP system
2. The history of ERP systems
3. Current ERP system characteristics
4. The modules of an ERP system
5. The market segments of ERP software systems
6. Implementation issues of ERP systems
7. The benefits and risks of ERP systems
8. ERP systems and the Sarbanes–Oxley Act
Study ObjectivesStudy ObjectivesStudy ObjectivesStudy Objectives
Chapter 15-4
Real WorldReal WorldReal WorldReal World Agri-Beef Co. is a privately held, Idaho firm with
annual sales in excess of $500 million. Believing
that its old accounting systems were antiquated, the management at
Agri-Beef recently switched to an ERP system. They experienced a very
successful implementation that took only six weeks and they began
experiencing benefits immediately. The treasurer of the company, while
describing the benefits with regard to the preparation and handling of
intracompany transactions, said the following:
“With the old method, we had to walk each transaction through. Now we
can post transactions straight through to another division’s general
ledger account.”
The improved efficiency resulted in two check runs instead of 22 runs,
and a 200 man hour savings per month.
Chapter 15-5 SO 1 The overview of an ERP system
Overview of ERP SystemsOverview of ERP SystemsOverview of ERP SystemsOverview of ERP Systems
Enterprise Resource Planning (ERP) system integrates all
business processes and functions into a single software
system, using a single database.
ERP system components:
1. Financials
2. Human resources
3. Procurement and logistics
4. Product development and manufacturing
5. Sales and services
6. Analytics
Data in a(n)
1. Operational database
2. Data warehouse
Chapter 15-6 SO 1 The overview of an ERP system
Overview of ERP SystemsOverview of ERP SystemsOverview of ERP SystemsOverview of ERP Systems
Exhibit 15-1 An ERP System
Chapter 15-7
Manufacturing companies implement ERP systems for the
primary purpose of
a. increasing productivity.
b. reducing inventory quantities.
c. sharing information.
d. reducing investments.
SO 1 The overview of an ERP system
Overview of ERP SystemsOverview of ERP SystemsOverview of ERP SystemsOverview of ERP Systems
Concept Check
Chapter 15-8 SO 2 The history of ERP systems
History of ERP SystemsHistory of ERP SystemsHistory of ERP SystemsHistory of ERP Systems
ERP systems:
► Developed during the 1960s and 1970s.
► First generation was materials requirements planning
(MRP) software.
► MRP evolved into manufacturing resource planning
(MRP II).
► ERP software did not become popular with large
corporations until the 1990s.
Chapter 15-9 SO 2 The history of ERP systems
History of ERP SystemsHistory of ERP SystemsHistory of ERP SystemsHistory of ERP Systems
Concept Check
In the late 1990s, the Y2K compatability issue was concerned
primarily with computer systems’
a. file retrieval capability.
b. data storage.
c. human resource comparisons.
d. capital budgeting.
Chapter 15-10 SO 3 Current ERP system characteristics
Current ERP System CharacteristicsCurrent ERP System CharacteristicsCurrent ERP System CharacteristicsCurrent ERP System Characteristics
EDI, Internet EDI, or extranets are used to connect a company’s ERP system to the IT systems of its suppliers and customers.
Exhibit 15-2 An ERP II System
Chapter 15-11 SO 3 Current ERP system characteristics
Current ERP System CharacteristicsCurrent ERP System CharacteristicsCurrent ERP System CharacteristicsCurrent ERP System Characteristics
In the years since 2004, spending on ERP systems increased or decreased based on several factors.
1.Companies cannot allow their ERP systems to become outdated.
2.Need to improve customer service through standardizing and combining business processes.
3.Global companies may have separate ERP systems in different countries.
4.Aging ERP systems need replacement.
5.Bigger IT budgets as economic conditions improve.
6.Many companies needed upgraded systems to comply with Sarbanes–Oxley Act.
7.Many companies wanted to take advantage of new technologies such as cloud-based ERP systems.
Chapter 15-12
Real WorldReal WorldReal WorldReal World Viper Motorcycle Company, a
Minneapolis-based manufacturer and seller of luxury motorcycles,
began business in 2002. Within one year, Viper was looking for an
accounting software system that would tie together the company’s
accounting with manufacturing, order processing, and other
business functions, while complying with Sarbanes–Oxley. Viper
first selected SAP Business One® as its ERP software system,
and later adopted SAP Business By-Design.® These IT Solutions
have helped Viper realize benefits in terms of operating
efficiencies, financial transparency, and setting internal controls.
Chapter 15-13
Current ERP System CharacteristicsCurrent ERP System CharacteristicsCurrent ERP System CharacteristicsCurrent ERP System Characteristics
SO 3 Current ERP system characteristics
Concept Check
Which of the following is not one of the reasons for increased
spending on ERP systems in recent years?
a. The need for Sarbanes-Oxley compliance
b. Globalization and increased competitive pressures
c. The need for earnings management
d. The need for customer service enhancements
Chapter 15-14 SO 4 Current ERP system characteristics
ERP ModulesERP ModulesERP ModulesERP Modules
The top-selling ERP system for large corporations and organizations is SAP.
Exhibit 15-4SAP® View of ERP Modules
Chapter 15-15
ERP ModulesERP ModulesERP ModulesERP Modules
Illustration: Match the ERP modules
with their purpose of the related
processes.
a. Taking customer orders and
preparing for the impending
revenue and cash collection.
SO 4 Current ERP system characteristics
Chapter 15-16
ERP ModulesERP ModulesERP ModulesERP Modules
b. Maintenance of the general
ledger and supporting journals
and subledgers.
SO 4 Current ERP system characteristics
Illustration: Match the ERP modules
with their purpose of the related
processes.
Chapter 15-17
ERP ModulesERP ModulesERP ModulesERP Modules
c. Keeping track of purchasing and
movement of goods and
materials.
SO 4 Current ERP system characteristics
Illustration: Match the ERP modules
with their purpose of the related
processes.
Chapter 15-18
ERP ModulesERP ModulesERP ModulesERP Modules
d. Accounting for personnel and
payroll activities.
SO 4 Current ERP system characteristics
Illustration: Match the ERP modules
with their purpose of the related
processes.
Chapter 15-19
ERP ModulesERP ModulesERP ModulesERP Modules
e. Data mining and other
processes for obtaining
feedback and supporting
managerial decision making.
SO 4 Current ERP system characteristics
Illustration: Match the ERP modules
with their purpose of the related
processes.
Chapter 15-20
ERP ModulesERP ModulesERP ModulesERP Modules
f. Planning and scheduling of
conversion activities.
SO 4 Current ERP system characteristics
Illustration: Match the ERP modules
with their purpose of the related
processes.
Chapter 15-21 SO 5 The market segments of ERP software systems
Market Segments of ERP SystemsMarket Segments of ERP SystemsMarket Segments of ERP SystemsMarket Segments of ERP Systems
Tier One Software
► Usually implemented in very large organizations.
► Minimum cost to purchase is approximately $350,000. Often, the cost exceeds $1 million.
► Three most popular ERP systems in tier one are SAP, Oracle, and Peoplesoft.
Chapter 15-22 SO 5 The market segments of ERP software systems
Market Segments of ERP SystemsMarket Segments of ERP SystemsMarket Segments of ERP SystemsMarket Segments of ERP Systems
Cloud Based ERP
All ERP vendors have developed ERP products for cloud computing. For example,
►SAP offers a cloud-based ERP system for small to medium-sized entities (SMEs) called SAP Business ByDesign.
►Customers who use cloud-based software need only a small IT system.
►ERP system can be used through a computer with Internet access and a Web browser.
Chapter 15-23
Real WorldReal WorldReal WorldReal World SkullCandy, founded in 2003, is a
manufacturer and seller of headphones exclusively tailored for
snowboarders, skateboarders, and other action-sports
enthusiasts. It has experienced tremendous growth over the past
decade. During one period, it grew 300 percent over four years.
The growth became explosive when its products were accepted
by Best Buy, Circuit City, and Target. In response to this growth,
SkullCandy sought a business software system that would meet
its accounting and reporting needs but could also easily scale to
match the company’s growth. The company chose SAP Business
ByDesign, a cloud-based system, as its ERP system.
Chapter 15-24
Real WorldReal WorldReal WorldReal World On leap day, February 29, 2012,
Microsoft’s Azure cloud experienced outages that, in
some cases, lasted up to 16 hours. The outages occurred in cloud
data centers in Chicago, San Antonio, and Dublin, Ireland. After
investigation, Microsoft determined the outage was triggered by a
security system bug related to leap day itself. The system sets
expiration dates for security certificates in the virtual machines
that run software for customers. Those security certificates, by
default, expire one year later. The system tried to set the security
date to February 29, 2013, a nonexistent date (since 2013 is not a
leap year). This was the initial cause of the crash that Microsoft
had to quickly fix.
Chapter 15-25 SO 5 The market segments of ERP software systems
Market Segments of ERP SystemsMarket Segments of ERP SystemsMarket Segments of ERP SystemsMarket Segments of ERP Systems
Concept Check
The type of ERP system used by large, multinational
corporations is known as
a. big bang implementation.
b. modular implementation.
c. Tier one software.
d. Tier two software.
Chapter 15-26 SO 6 Implementation issues of ERP systems
Implementation of ERP SystemsImplementation of ERP SystemsImplementation of ERP SystemsImplementation of ERP Systems
Important factors and issues to considers when implementing
an ERP system.
1. Hiring a consulting firm
2. The best fit ERP system
3. Which modules to implement
4. Best of breed, verses ERP
modules
5. Business process
reengineering
6. Customization of ERP system
7. Costs of hardware and software
8. Testing the ERP system
9. Data conversion
10. Training of employees
11. Method of conversion, or “go
live” Big Bang Location-Wise Modular
Chapter 15-27 SO 6 Implementation issues of ERP systems
Implementation of ERP SystemsImplementation of ERP SystemsImplementation of ERP SystemsImplementation of ERP Systems
Concept Check
Which of the following ERP approaches accomplishes the ERP
implementation beginning with one department?
a. the pilot method
b. the modular implementation approach
c. the big bang approach
d. the location-wise implementation method
Chapter 15-28
Benefits and Risks of ERP SystemsBenefits and Risks of ERP SystemsBenefits and Risks of ERP SystemsBenefits and Risks of ERP Systems
Benefits of ERP Systems
1.Interactive nature of the modules.
2.Real-time nature of processing.
3.“Best Practices” nature of the processes.
4.Single database enhances sharing of information.
5.Capability to analyze large amounts of data.
6.Capability to enhance e-commerce and e-business
7.Capability to interact in real-time.
8.ERP systems are scalable.
SO 7 The benefits and risks of ERP systems
Chapter 15-29
Benefits and Risks of ERP SystemsBenefits and Risks of ERP SystemsBenefits and Risks of ERP SystemsBenefits and Risks of ERP Systems
Risks of ERP Systems
1.Implementation Risks
2.Operation Risks
a. Security
b. Availability
c. Processing integrity
d. Online privacy
e. Confidentiality
SO 7 The benefits and risks of ERP systems
Chapter 15-30
ERP Systems and the Sarbanes-Oxley ActERP Systems and the Sarbanes-Oxley ActERP Systems and the Sarbanes-Oxley ActERP Systems and the Sarbanes-Oxley Act
SO 8 ERP systems and the Sarbanes–Oxley Act
ERP systems
Provide feedback information to management regarding internal control. Steps the company must accomplish:
►Establish and maintain a list of incompatible duties.
►Tracking each employee’s ID and password.
►Used to properly segregate duties.
►Can incorporate a matrix of tasks that are incompatible.
►Allows real-time monitoring and reporting of exceptions.
Chapter 15-31
ERP Systems and the Sarbanes-Oxley ActERP Systems and the Sarbanes-Oxley ActERP Systems and the Sarbanes-Oxley ActERP Systems and the Sarbanes-Oxley Act
SO 8 ERP systems and the Sarbanes–Oxley Act
Exhibit 15-5Examples of Accounts Payable Internal Control Reports
Chapter 15-32
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