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Giving a Critique of the Usefulness of Spreadsheet Modelling in Financial Accounting and Reporting - Essay Example

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Giving a Critique of the Usefulness of Spreadsheet Modelling in Financial Accounting and Reporting

Computer spreadsheets are very much beneficial in manipulating large volume of data very easily and in quickly (Moutinho, et al., 1994, p.26-27). Spreadsheets are very much useful in modelling situations in financial accounting and helps in various decision making processes. Uses of Spreadsheets Spreadsheets are argued to be most frequently used by most of the organisations all over the world. There are many tailor-made tools available in spreadsheets which perform specific business processes (Baker, et al., n.d.). There is an increased popularity in the use of spreadsheets in business concerns. It is so because of spreadsheets being an end user computing platform. The information systems department takes long time to complete the analysis and reporting. Moreover, spreadsheets are easy to use powerful software to do business analysis (Fisher, n.d.). Spreadsheets are used by many companies to assist in the management of information related to critical business procedures. It is done to comply with the rules and regulations of financial accounting and reporting. With the advent of International Financial reporting Standards (IFRS), there is a need for the modifications in the existing system of financial accounting procedures in the organisations. Spreadsheets have thus become an interim option for the organisations before these changes are fully introduced in the accounting applications. Once the spreadsheets are in use in the organisation, the executives feel that the spreadsheets will be replaced by a fully designed new accounting system, very shortly. But in reality, those spreadsheets may be in use in the organisations for a much longer term. Hence it becomes difficult for managers to manage the increasing number of spreadsheets. Moreover, replacing the spreadsheets with the new accounting system can be costly option for the organisations (Baxter, 2006). In the corporate world, spreadsheets are used either for modelling purpose or for operational purpose. Modelling spreadsheets are mainly used for a particular purpose or activity and are used as complex calculators. Spreadsheets meant for operational use acts as a core programme in business by assisting in daily transactions in business. Operational spreadsheets use all types of data, both static and dynamic and also calculations involving those data. Modelling spreadsheets become redundant once the particular task is done with it. Whereas, operational spreadsheets become an integral part of organisational processes and are in use for long term (Baxter, 2006). Five Categories of Spreadsheet Analysis Base-Case Analysis Most of the spreadsheet analyses are done for measuring the results or outcomes relative to certain base case of comparison. A base case can be either the current policy in use or the scenario which is most likely to occur or the best case or the worst case (Powell & Baker, 2010, p.120). This type of analysis can help in answering questions like what would be the expected profit next year if the current polic ...Show more


GIVING A CRITIQUE OF THE USEFULNESS OF SPREADSHEET MODELLING IN FINANCIAL ACCOUNTING AND REPORTING Table of Contents Table of Contents 2 Spreadsheet modelling 4 Uses of Spreadsheets 4 Five Categories of Spreadsheet Analysis 6 Base-Case Analysis 6 What-If Analysis 6 Breakeven Analysis 7 Optimisation Analysis 7 Simulation and Risk Analysis 7 Spreadsheet Errors 8 Spreadsheets Modelling leading to Financial Crisis 9 Security and Control of Spreadsheets 9 Alternative to use of Spreadsheet Modelling 10 References 12 Spreadsheet modelling A spreadsheet is nothing but a blank table which is composed of number of boxes formed by equally spaced horizontal and vertical lines…
Author : lefflerstan
Giving a Critique of the Usefulness of Spreadsheet Modelling in Financial Accounting and Reporting
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