ROI Notes - C 12 SEGMENT REPORTING AND DECENTRALIZATION notes-c12 Written by Professor Gregory M Burbage MBA CPA CMA CFM CHAPTER LEARNING

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1 C 12 - SEGMENT REPORTING AND DECENTRALIZATION notes-c12.doc Written by Professor Gregory M. Burbage, MBA, CPA, CMA, CFM © CHAPTER LEARNING OBJECTIVES: MAJOR: - Terminology, as in all chapters. - Memorize and use ROI and RI formulas. - Prepare a segment margin income statement. MINOR: - Calculate minimum transfer price – Appendix 12A. - Identify how Cost, Profit & Investment Centers are evaluated. - Identify advantages and disadvantages of using ROI and RI. RESPONSIBILITY ACCOUNTING: RESPONSIBILITY ACCOUNTING recognizes each person in an organization who has any control over cost or revenue to be a separate responsibility center whose stewardship must be defined, measured and reported upward in the organization. DECENTRALIZED organizations are where decision makers are spread throughout the organization and make decisions relating to their area of responsibility. RESPONSIBILITY CENTER is an organizational point where there is control over cost, revenue and/or invested funds. COST CENTER is where there is control over cost only. PROFIT CENTER is where there is control over cost and revenue. INVESTMENT CENTER is where there is control over cost, revenue and invested funds. EVALUATION OF: Cost center - by performance reports on costs. Profit center - by contribution margin I/S Investment center - by CM I/S, but in relation to rate of return on invested funds. SEGMENT REPORTING: SEGMENT REPORTING is having an income statement for each part of the organization. Such as: company, division, department, product line, or location. I.e., any part of the company, which has both costs and revenues. Segmented Income Statements are prepared on both the traditional (full cost GAAP approach for external purposes) and on the contribution approach for internal purposes. Note: GAAP now requires, since issuance of FASB 131, internal segmented divisions, etc. to be presented on external financial statements.
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This note was uploaded on 01/03/2011 for the course COMM 290 taught by Professor Brian during the Winter '09 term at The University of British Columbia.

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ROI Notes - C 12 SEGMENT REPORTING AND DECENTRALIZATION notes-c12 Written by Professor Gregory M Burbage MBA CPA CMA CFM CHAPTER LEARNING

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