The paper 'Implementation of International Financial Reporting Standards in Australia" is a perfect example of finance and accounting coursework. In order to make a right pitch presentation for getting money sanctioned for a project, it is essential for the chief information officers (CIOs) to provide details of the project and especially include all the costs required to initiate the project. It has been often found that CIOs while presenting their pitches have failed to include the financial aspects of the project in detail, which results in under-sanctioning of budgets for the project. However, a study by McKinsey and Uptime states that corporate decisions regarding technological projects are not based on the cost of the project. Nonetheless, it cannot be denied that the inclusion of true costs in a pitch would definitely help the company to estimate the actual cost of the project.
The article under review presents one such example, wherein a company-sanctioned a budget of $22 million for installing data servers as it considered the project to be a positive one. However, the company was totally unaware about the additional cost of $54 million that was needed to develop cooling and power capacities for running the servers.
Also, another additional #32 million was required for operating the servers for the lifetime. Thus, the tech team overlooked the true cost of the project and failed to account for $86 million. Thus, it is required that the chief financial officers (CFOs) should intervene while sanctioning the budget for a project. Although the CFOs intervention might solve various accounting issues related to budgeting, it might also create problems for the project. Just as the CIO is not aware of the accounting practices, the CFO would not understand the technical aspects.
Thus, it might result in a clash between the two groups over the budget. The article analyzed provides many insights into the accounting practices, ethical issues and corporate politics within an organization. As the CIO is unable to provide the true costs of a project, it creates various issues within the organization the chief among them is that of budgeting. The accounts department works on a set budget and can sanction as much to the projects.
Further, the budgeting is decided after taking into consideration various other factors such as profitability of the project, gestation period, impact of accounting regulations, taxation laws etc. However, if the technical team does not provide the true cost of the project, the accounts department would not be able to understand all the intricacies of the project and might sanction only as much as mentioned in the proposal. This may result in creating discords in the future, with the technical team demanding additional money while the accounting team denying them on the basis of the original proposal.
Any additional budget would also mean that the accounts team would have to re-orient their budgeting plan, which is a long-drawn process (Hollander et al 2000). Further, the absence of true cost may also raise ethical issues in the company. As the technical team is unable to provide the entire cost for the project, it might lead to allegations by the stakeholders towards the company for misappropriation of funds and deliberate hiding of crucial information. The company often advertises its key technical projects in its annual reports and investor papers to attract investors.
These promotional materials also contain the project size and cost. Many investors also decide on investing in the company based on such information. However, with the increase in project costing, the investors may feel cheated and consider the company as unethical (Hollander et al 2000).
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