This document discusses considerations for a company's chart of accounts (COA). It notes that companies face issues like disparate systems, multiple general ledgers, and difficulties with reporting. A COA project can help address these issues by standardizing the account structure and reference data. The document outlines how future reporting requirements, myths versus realities about COAs, and reasons for undertaking a COA project, such as improved analysis, data requests, and controls.

1. Chart of Accounts Considerations
Discussion Document
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2. Contents
Issues Facing Companies
Why Focus on the COA?
Impact of Future Reporting Requirements
What is the Chart of Accounts
Finance Reporting Vision
COA Myths vs. Realities
Reasons for Undertaking a COA Project
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3. Issues Facing Companies
 Multiple, disparate systems and limited system interfaces
 Numerous general ledgers and chart of accounts
 Large number of intercompany accounts
 Large number of legal entities
These issues are primarily
 Manual workarounds process-related and are
 Differences in management, performance, and legal entity reporting often caused by a lack of a
common chart of accounts
 Re-keying data between systems
and reference structure.
 Calculating allocations (i.e., corporate charges, facilities, IT, legal)
 Poor data integrity
 Lack of written policies, procedures, and work instructions
 Lack of organizational accountability
 Gaps in skill sets and functional expertise
 Complexity of the business
 Dependencies outside of the finance organization

4. Why Focus on Chart of Accounts?
With added emphasis on reporting efficiencies and reporting requirements, integration and
consolidation many companies are discovering that their chart of accounts are either broken or in
need of modification.
Companies, regardless of size, recognize problems in data collection and reporting and the
current impacts on the close, consolidation and reporting processes.
 The Chart of Accounts is broken
 The Chart of Accounts is obsolete
 Too many Charts of Accounts
 The Chart of Accounts is unmanageable
 Chart of Accounts is inadequate
 Disparate reporting systems requiring human intervention/mapping
 Existing Chart of Accounts do not capture reporting requirements
 Future requirements not taken into consideration (IFRS, Growth)

5. Impact of Future Reporting Requirements
The impact of IFRS, even if not adopted, will be added emphasis on reporting. As the
public and other relationships adjust to the reporting, companies will need to address their
capabilities.
 Revenue recognition Magnitude of effort: ‘more than just an accounting exercise’
 Research & development costs
New controls and policies to support judgments
 Acquisitions
 Impairment tests Costs associated with enterprise-wide conversion, including
 Inventories audit effort and other external adviser costs
 Restructuring
 Fixed Assets Upgrade and adapt systems across entire enterprise
 Provisions
 Income taxes Stakeholder expectations, including budget/planning and
 Employee benefits investor relations
 Financial instruments
Audit effort related to first-time adoption
 Consolidation

6. What is a Chart of Accounts?
A listing of typical account names, descriptions and classifications that are used for
recording accounting transactions.
There are many variations on the numbering
1000 Assets convention, but generally these range of numbers are
2000 Liabilities utilized and follow a financial statement presentation.
3000 Equity • There can be significant variations for
4000 Revenue international companies
5000 Other Income & • Certain industries have unique requirements
Expense to capture specific information to facilitate
6000
regulatory reporting
7000
Expenses
8000
9000 Miscellaneous

7. What is a Chart of Accounts?,- cont.
In the General Ledger most accounts can be configured in a major and minor account
format
Major Account Minor Account
7 0 4 0 - 0 0 1
Expense Account Related to a specific expense
So if the 7040 account was a travel account, the 001 suffix
might represent a specific type of travel the client tracks
This account configuration will exist in the General Ledger, but to be meaningful, the
source of the transaction must be coded correctly.
The MORE COMPLEX the account structure, the greater
risk of DATA INTEGRITY issues.

8. What is the Chart of Accounts? – cont.
COA is a key element of the consolidation process
In this example, it is
necessary to have a
COA that can
Summary summarize the G/L
Account accounts into a Corp.
COA that facilitates
Management, Statutory
and Regulatory
reporting
Detailed Account –
Major and Minor combinations
G/L accounts are mapped to Consolidation accounts

9. Finance Reporting Vision
A cohesive COA structure that provides for efficient consolidated financial reporting and
enables business unit management reporting and analysis.
Financial
Statement Certification
Integrity
Predictable, Explainable Single Version of the Truth
The COA is Financial Results
the “Foundation”
for efficient Reporting Transparency
Organizational Accountability
Reporting and
analysis.
Seamless Work Flow Process Redesign
Skilled Workforce Training & Tools
Core Financial
Financial Fundamentals Transaction
(Standard Chart of Accounts, Integrated G/L, Subsystems, Sub-ledgers, Data definitions, Procedures)
Standard Common Chart of Accounts – at some level

10. COA Myths v. Realities
COA Myth COA Reality
A COA is set of 5 or 6-digit A COA is part of an overall reference structure (code
account numbers to which block) that can include 20 or more fields to which
transactions are coded. transactions are coded.
Migrating to one COA will solve Without proper integration, migrating multiple business
all COA-related issues units to one COA can have negative results. E.g. A unit
that uses 100 accounts could gain access to 4,000.
There is an ideal number of At the G/L level posting account, this is a Business Unit
accounts for all companies. or Operation Unit decision. However, at a consolidated
level there should be hundreds of accounts, not
thousands
COA changes entail only When modifying a COA, upstream and downstream
changes to the general ledger. systems must be considered. (Upstream: sub-ledgers,
off-system GL’s, etc.) (Downstream: consolidation tools,
data warehouses, other query tools, etc.) COA projects
have a significant change management component and
require communication, testing and training.

11. Reasons for Undertaking a COA Project
Benefits Benefits
• Information is compiled • Simpler structure decreases
from GL rather than Facilitates risk of errors by
manually -allows process to Allows for
Data Request Forms
Improvements to accountants
be re-designed Close and Enhanced • Fewer accounts to maintain
• Statement of cash flows can Reporting Process Controls and reconcile
be automated • Manual data gathering tools
• Fewer accounts to reconcile can be eliminated
Benefits Benefits
• Consistency in account • Facilitates aggregation of
usage Allows for tax information (e.g. M&E
• COA at right level of Improved Other and other Schedule M
granularity Analysis information)
• Meaningful account •Allows for aggregation of
groupings other “one-off” reporting
requirements (e.g. census,
D&B, etc.)
Benefits can only be realized if processes are re-designed to take advantage of
enhancements.
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12. Contact Information
Kevin J. Duffy
duffyri@yahoo.com
www.linkedin.com/duffyri