Chapter 6 BTF

CHAPTER 6 BTF: THE FINANCE FUNCTION AND FINANCIAL INFORMATION
1. Types of financial information:

1) Planning info: helps with planning process
2) Operational info: day-to-day
3) Tactical info: helps deal with short-term issues and opportunities
4) Strategic info: longer-term issues
2. Centralisation of the finance function:
Works well for:
- Transaction recording
- External reporting
- Managing cash
Less useful for:
- Supporting the achievement of orgainsational objectives when it comes to internal
reporting on performance to operational managers
3. Treasury management section:
- Managing the funds of the business, namely cash and other working capital item plus
long-term investments, short-term and long-term debt and equity finance
- Managing financing decisions and investment
- Managing foreign exchange
4. Characteristics of management accounting information rather than financial reporting
information
- Important - forecasts + budget to assist planning:
1) It is both forward looking and historical
2) Likely to include a cash flow forecast
3) Likely to include budgetary information
5. Financial reporting
- Involves preparing financial information including
 Financial statements
 Tax
 Regulatory reporting
- Providing information about the business to external users
6. Management accounting:
- Driven not by rules or standards
- But by the need to meet the information requirements of manager within an organisation
who use the information to plan, control, make decisions and monitor performance.
7. Shareholders: user group is most likely to use accounting information for published and
audited financial statement
8. Balanced scorecard:
- Is a performance measurement tool focused on a variety of performance measures
important to a business, rather than purely financial ones
9. Critical success factors (CSFs)
Product features that are particularly valued by a group of customers and, therefore, where
the organisation must excel to outperform competitors.
10. The primary focus of the users of financial statements of an entity
- The main concern for entity’s suppliers is liquidity
- The main concern for entity’s shareholders is risk and return
11. GRI Sustainability Reporting Standards
- Best example of a global, voluntary code for corporate responsibility and sustainability
reporting
- Environmental, economic, social
12. Business partnering
Roles:
- Involvement in strategy formulation, implementation and communication
- Involvement in commercial decision making and negotiations
- Leading on business analysis; and
- Being a sounding board, trusted adviser, critical friend and facilitator of productive
business discussions
13. Which organisations encourage organisations to improve reporting holistically on
economic, environmental and social impact?
- Global Reporting Initiative (GRI) standards
- Triple Bottom Line approach
- IASB, TCFD, CDSB do not encourage holistic disclosure
14. TCFD - Classes of risk (5)
- Acute v chronic: extreme weather/permanent changes
- Policy and legal: related to change in laws that may bring about additional expenses or an
adverse financial impact. This is what the finance director is concerned about
- Technology: lower emission replacing current, the risk that a business’s products or
services are replaced by more economically friendly substitutes (eg, replacing power from
coal generators to power from wind and solar energy)
- Market: changing costs of raw materials + customer behaviour
- Reputation
15. Information system boundary
16. Structured decisions

- Can be reduced to a series of rules which, if followed, will lead to the correct decision
being made.
- Providing managers with the right information to make structured decisions is what
managerment information systems specialise in
17. Qualities of a secure information system: ACIANA
18. Ensuring the security of information

19. Information processing and management
- A management information system concentrates on producting useful reports from
internal data
 Much of internal data will arise from transactions that have been recorded by the transaction
processing system
20. Enhancing qualitative characteristics of financial info
- Comparability:
 Throughout the business
 Over time
 Across different business
- Understandability
 Information should be clear and concise if it is to be readily understandable
- Verifiability
 Means diferent knowlefgeable and independent observers could reach consensus,
although not necessarily complete agreement
- Timeliness
 Means having information available to decision-makers in time to be capable of
influencing their decisions.
21. Relevant
- When financial information influences the decisios of users

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CHAPTER 6 BTF: THE FINANCE FUNCTION AND FINANCIAL INFORMATION

1. Types of financial information:

16. Structured decisions

18. Ensuring the security of information

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