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PROJECT REPORT ON

“CAPITAL EXPENDITURE”

MASTERS OF COMMERCE DEGREE

SEMESTER- I

ACADEMIC YEAR:2014-15

SUBMITTED BY

MISS. POOJA MAURYA

ROLL NO: 17

N.E.S. RATNAM COLLEGE OF ARTS, SCIENCE AND COMMERCE,N.E.S. MARG, BHANDUP (WEST), MUMBAI-400078

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PROJECT REPORT ON

“CAPITAL EXPENDITURE”

MASTERS OF COMMERCE DEGREE

SEMESTER- I

ACADEMIC YEAR:2014-15

SUBMITTED BYIN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF MASTER

DEGREE OF COMMERCE

MISS. POOJA MAURYA

ROLL NO: 17

N.E.S. RATNAM COLLEGE OF ARTS, SCIENCE AND COMMERCE,N.E.S. MARG, BHANDUP (WEST), MUMBAI-400078

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N.E.S. RATNAM COLLEGE OF ARTS, SCIENCE AND COMMERCE,

N.E.S. MARG, BHANDUP (WEST), MUMBAI- 400078

CERTIFICATE

This is to certify that the project report on “CAPITAL EXPENDITURE” is bonafide record of project worked done by MISS. POOJA MAURYA submitted in partual fulfillment of the requirement of the award of the Master of Commerce Degree University of Mumbai during the period of his/her study in the academic year 2014-15

INTERNAL EXAMINER:

EXTERNAL EXAMINER:

Principal Mrs. Rina Saha

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DECLARATION

I hereby declare that this Project Report entitled “CAPITAL EXPENDITURE” submitted by me for the the award of Masters Of Commerce Degree; University of Mumbai is a record of Project work done by me during the year 2014-15. this is entirely my own work.

NAME: POOJA MAURYA ROLL NO : 17 Signature

Place: Mumbai, Bhandup (W)

Date:

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ACKNOWLEDGEMENT

I owe a great many thanks to great many people who helped and supported me doing the writing of this book.

My deepest thanks to lecturer, MILIND SIRof the project for guiding and correcting various documents of mine with attention and care. She/ he has taken pains to go through my project and make necessary corrections as and when needed.

I extend my thanks to the principal of NES Ratnam College of Arts Science and Commerce, Bhandup (w), for extending her support.

My deep sense of gratitude to Principal Mrs. Rina Saha of NES Ratnam College of Art, Science and Commerce for support and guidance. Thanks and appreciation to the helpful people at NES Ratnam College of Arts, Science and Commerce , for their support.

I would also thank my institution and faculty members without whom this project would have been a distant reality. I also extend my heartfelt thanks to my family and well-wishers.

Candidate Name: POOJA MAURYA

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INDEX

RS.NO TOPICS PAGE NO.

1 Definition & Policy 7

2 Process Summary 8

3 Capital Expenditure 10

4 Workflow 11-23

5 Conclusion 24

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Definitions Capital Expenditure – The money spent for acquiring or upgrading assets. Relative to ABC’s business, capital expenditures are generally made to purchase furniture or fixtures, computers, programming equipment or upgrades, broadcast technical equipment or upgrades, leasehold improvements, or automobiles.

The icon indicates the presence of an internal control.

Policy

ABC is responsible for establishing adequate controls over capital expenditures to ensure the timely procurement of these assets and accurate and timely recognition of these assets in the accounting records. Our policy requires that the requisition and purchase of all capital expenditures must follow the procedure as stated within this document. The objectives of this procedure are to

• Specify and set up capital expenditure vendors. • Allow for management review and approval for investments made in capital

equipment. • Recognize qualifying purchases as fixed assets in the company’s accounting

systems. • Track and review capital projects against predefined budgets or plans. • Pay for capital expenditure items on a timely basis and consistent with approved

order details. • Leverage the company’s purchasing power through centrally negotiated purchase

contracts with key capital vendors.

The company does not consider purchases below $600 to be capital expenditures. Assets purchased below the $600 limit are expensed as they are received.

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Process SummaryFor Market Capital Expenditures, employees (requestors) identify capital expenditure requirements. The Business Manager (BM) or originating requestor generally initiates the requisitions in the WorkPlace software. The software allows for a series of Corporate-level management personnel, termed "approvers," who review and approve the capital expenditure. Approvers confirm that requisitions are authorized according to the budget or, if not part of the approved budget, assess the appropriateness of the investment.

For Corporate Capital Expenditures, the approval process is similar. Corporate employees who want to purchase a capital asset must obtain approval from their manager and bring that request to either the Operations Controller or the Shared Services Controller, who then initiate requisitions in WorkPlace.

The financial statement elements associated with Capital Expenditures are Fixed Assets and Accounts Payable (AP). The Process Manager for this policy and procedure is the Operations Controller. The key systems involved in this procedure are the Capital Expenditure PO system, WorkPlace Purchase Order Receiving Module (referred to in this document as the “WorkPlace software” or “WorkPlace”), and the Great Plains Fixed Assets system (referred to in this document as the “Great Plains system” or “Great Plains

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ProcedureFollow the procedure in this section for Capital Expenditures requests.

8.1 Requestor Identifies Need

Employees in the Market (usually Engineers, Operations Managers, or BMs) can request the purchase of a capital asset. The employee (requestor) begins the process by obtaining a quote from a vendor for a capital asset.

8.2 Corporate Requestors Obtain Approval from Manager

Corporate employees obtain approval from their manager before submitting a requisition to the Operations Controller or the Shared Services Controller.

8.3 New Vendor Added to Accounts Payable Corporate Master Vendor List

If the vendor is new, either the requestor or the BM in a Market submits the Capital Expenditure vendor information to the Corporate AP department. The new vendor is submitted using the Vendor Request Form to Diane Flood, Corporate AP Manager. Refer to Setting Up New Vendors Policy and Procedures - AP01M. The Vendor Request Form provides the Corporate AP Department with information such as the vendor’s address, payment terms, and W-9 information. This form is used to both add and delete a vendor to or from the Corporate Master Vendor List on an as-needed basis.

8.4 Requestor Enters Requisition Into WorkPlace

ABC uses the WorkPlace Purchase Order Receiving Module from Paramount Technologies to procure capital equipment. WorkPlace is a web-based application that allows the requestor in a market to log on and enter a requisition for a capital expense item. The system then routes the requisition to the appropriate approvers using a workflow that is built into the WorkPlace application. Upon final approval, the Operations Controller processes the requisition and creates a Purchase Order (PO) in the Great Plains Purchase Order module.

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Note: Each market has one User Name and Password. The BM, Engineer, and any other individual designated by the Market Manager are approved requestors who can access the system and initiate a requisition.

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The requestor creates a Capital Expenditure Request as follows:

1. Access the ABC WorkPlace application at http://WorkPlacelive.abc.com. The system displays the Login window.

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2 Type the User Name and Password, and click Login. The system displays the My WorkPlace tab

3 Click the New Requisition link to enter a new item. The system displays the Requisition window.

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4. Type the Item, Item Description, Qty, U/M, and Price for each line item. The Item and Description are freeform areas, but you can choose the Item from a predefined list using the Lookup (magnifying glass) feature.

5. On the General tab, type your Department number, which is the same as the Market Number used in the Great Plains system. Click the magnifying glass to select the correct department number from a list of departments and their descriptions.

6. Type the Required Date. 7. You do not need to type the Promised Date. The Site ID is always 001. 8. For the Ship To Address, type your Market Number. 9. Click the magnifying glass to select a Vendor that is already set up in the Great

Plains system.

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10. Type the G/L Account in the following format: Market Number-14990-Location Code (for example, 103-14990-0206). BMs can obtain their market-specific coding by contacting their staff accountant at the Corporate office.

11. Set the Priority for the purchased item. This is an important step. This Priority assigns the correct workflow for approval of this purchase. It determines how the requisitions will fit in the flow for approval. The requisition will be routed through the proper approval lines established in the workflow

12. Click the Attachment hyperlink at the top of the window to attach documentation or quotes. The system displays the Attach File window.

13. Click the Browse button to locate the file that you need to attach, and then click Attach. Repeat this step for as many files as you need to attach.

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14. When you have completed the form, click Save at the bottom of the window. The system redisplays the Requisition window

15. Click Save at the bottom of the Requisition window.

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16. When you are ready to submit the requisition, click Submit at the top of the window. The system displays the confirmation dialog.

17. Click Yes to confirm the submission. The system redisplays the Requisition window with the “Requisition has been Submitted” message at the top of the form.

Checking the Status of a Requisition

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You can check the status of a requisition to find out its current stage in the approval process.

1. From the My WorkPlace tab, click Find Requisition. The system displays the Requisition window.

2. Select the requisition that you want to check.

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3. Click the Details hyperlink at the bottom of the window. The system displays the requisition status.

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WorkPlace Routes Request Through Approval Process

WorkPlace sends an e-mail message to the Approver based on the Priority assigned on each requisition. The following table summarizes which approvers have been assigned to each priority.

Priority Approver

Computers, Printers, Phones.

Shared Services Controller

Towers, Studios, Programming

Corporate Director of Engineering

Facility Build Out Corporate Director of Engineering

IT Insurance Claims Shared Services Controller

Technical Insurance Claims

Corporate Director of Engineering

Auto Corporate Operations Controller

Auto Insurance Claims Corporate Operations Controller

The Approver accesses the Workflow application and approves or disapproves the request in the system. If the Approver denies the capital expenditure request, an e-mail notice is automatically sent to the requestor.

1 Requisition Approved

Once the Approver has approved the requisition, WorkPlace electronically routes it to Operations Controller. The Operations Controller receives an e-mail from the system, alerting him that an Approver has routed a requisition to his holding queue in the software. The Operations Controller then reviews the requisition for completeness, proper coding, and asset classification. If the requisition is incomplete or was assigned an inappropriate Priority, the Operations Controller will make changes to the content of the requisition, change the Priority, or both. Often a change in Priority will require that a different Approver approve the requisition. In this case, WorkPlace routes the requisition to the correct Approver based on the Operations Controller’s change.

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The Operations Controller routes approved requisitions to the EVP, along with an e-mail notifying the EVP that the approved requisition has been routed to his system queue. The EVP then goes into Work Place and reviews the requisition. If he approves the requisition, it is routed back to the Operations Controller, who creates a PO, as detailed in Section 8.6. If the EVP disapproves the requisition, a notice is sent to the requestor.

2 Requisition Not Approved

If the Approver or the Corporate Operations Controller does not approve a requisition, the Approver or the Operations Controller will make an entry in the comment field of the requisition. This tells the requestor why the order was denied.

8.6 Operations Controller Creates Purchase Order

The Operations Controller creates a PO in the Great Plains system. When the Operations Controller creates the purchase order, an e-mail message providing the PO number and a PDF file of the PO is sent to the person who entered the requisition.

Requestor Places Order with Vendor

Once the requestor receives the PO from the Operations Controller, the requestor can place the order with the Vendor. The requestor should send the PO to the vendor so the vendor can reference the PO on the invoice.

8 Vendor Fills Order

Once the PO is received, the Vendor can fill the order as stated on the PO.

.9 Vendor Mails Invoice to Requestor

Invoices will be mailed to the requestor who ordered the fixed asset.

10 Requestor Mails Invoice and Attachments to Corporate Accounts Payable

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The requestor mails the invoice, PO, and the original quote submitted with the requisition to the Corporate AP Manager.

11 Corporate Accounts Payable Pays Vendor

The AP Manager reviews the information to determine whether there are any variances from what was approved. If there is a difference, the requisition must be rerouted and approved for the updated amount in the WorkPlace application.

AP must perform a two-way match to pay a Capital Expenditure invoice. The match compares the invoice and purchase order. The Corporate AP Manager only pays properly matched invoices.

After the invoice has been received and matched against the PO and processed, the asset information is transferred from AP to Fixed Assets in the Great Plains system.

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Capital Expenditure Authorization (CEA) Process

Capital Expenditures

A Capital Expenditure is the amount used during a particular period to acquire or improve long-term assets such as property, plant or equipment.

A Capital Asset is a long-term asset that is not purchased or sold in the normal course of business. Generally, it includes fixed assets, e.g., land, buildings, furniture, equipment, fixtures and furniture. The university accounts for these expenses as assets rather than operating expenses, because they are resources which have extended, useful lives. For example, a classroom will be utilized for many years, whereas office supplies will not.

Capital Expenditure Authorization Process

The Capital Expenditure Authorization (CEA) Process begins when a department or school identifies the need for a specific project or capital equipment purchase. Capital Authorization Requests are requested, authorized and managed in an electronic web-based system.

1. Department or school representative determines a need for a Capital Expenditure Authorization (CEA).

Department or school representative gathers information and documents specific, written details of what the expenditure will constitute, accompanied by a justification addressing the necessity of the expenditure.

1. Department or school representative must contact the Budget and Fiscal Officer (BFO) of their respective school, prompting the need for processing a CEA request.

2. In doing so, one must forward all related information as an attachment, including:

3. Name of Individual Requesting Name of Individual Responsible (for managing project) Associated department/school Location of the project (campus) Project Title Cost/Expenditure breakout Equipment Type (if applicable)

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Justification of its need and all recommended funding sources (if known)

The BFO then performs a needs assessment of the request. If the request meets all associated requirements and is deemed fiscally prudent, he/she will move to designate the funding source(s) and record the request into the Tufts University CEA System.

Once recorded into the University CEA System, the request routes through a system generated approval workflow (which varies, depending upon CEA type, project location, funding sources and amounts)

Once all approvals have been gained, the request becomes a project and representatives within the General Accounting Office will systematically assign a Project/Grant number and authorize its budget within the PeopleSoft Financials system.

All capitalized expenses related to the CEA can then be charged to the Project/Grant number assigned and managed/tracked within PeopleSoft.

Access and Use of the Capital Expenditure Authorization SystemThe Tufts Capital Expenditure Authorization (CEA) System is an electronic web-based system, accessible via PeopleSoft. This system offers embedded on-line approvals and electronic routing, in accordance with local and university approval policies. Authorized users of the system are able to create, track and search upon capital expenditure requests. Supporting documentation can also easily be attached in electronic format.Capital Equipment Acquisition ProceduresA Capital Equipment Acquisition in the amount of $50,000 OR MOREMUST BE PROCESSED via the University Capital Expenditure Authorization Process (CEA Workflow Approval System).Capital Equipment Acquisitions under the amount of $50,000 MUST BE PROCESSED via the University Capital Expenditure Authorization Process (CEAWorkflowApprovalSystem) WHEN:

1. Funding Sources are anything other than departmental budgets or grants Acquisition of Vehicles Capital Acquisition by Lease

Capital Construction and Renovation Acquisition ProceduresConstruction, Renovation and Property Acquisition Projects of $25,000 OR MORE MUST BE PROCESSED via the University Capital Expenditure Authorization Process (CEA Workflow Approval System) if the project is for $25,000 or more.

1. The CEA System MUST BE USED for projects under $25,000 when funding includes any source other than a Dept ID.

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2. The CEA System MUST BE USED when the process for capital construction and renovation is coordinated through the Operations Division.

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MAIN CHARACTERISTICS OF BUDGETING FOR CAPITAL EXPENDITURES

A. Why Dual Budgeting?

Dual budgeting (or budgeting separately for current and capital expenditures) originated in European countries in the late 1930s in order to help governments ensure that the resources they borrowed were used only for capital expenditures.9 10 In recent years, the use of a “golden rule” (which allows borrowing only for capital spending), could be seen to justify a separate treatment of capital and recurrent expenditures. But over time, it came to be accepted that regardless of their financing sources, government’s current spending and capital investment are considered together, and that these two types of expenditures together can produce results.11See Spackman, 2002, p. 9, for more examples on this practice.

For example, the Netherlands had separate capital and current budgets from 1927 to 1976; subsequently, there has sometimes been pressure to return to this arrangement from those who believe that this may lead to more public investment, but these arguments have been resisted (Spackman, 2002, p. 10).

Detailed information on the creation of dual budgeting in the Sweden and the U.K. in the 1930s and 1940s can be found in A. Premchand, Government Budgeting and Expenditure Controls—Theory and Practice,

International Monetary Fund, 1983, pp. 292–302. 10 See also Premchand in Shah, Anwar, (ed.), 2007, Budgeting and Budgetary Institutions, p. 89.

11 In the United States, periodic recommendations were made for the introduction of a separate capital budget. But this never materialized, primarily because it might tilt the resource allocation in favor of “bricks and mortar.” However, the budget documents presented a special analysis of investment expenditures, which was

for information only and had no accounting or other implementation impact for the budget structure. For further details, see A. Premchand, op. cit., p. 302.

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For many low-income countries, separate current and capital budgets—i.e., a “dual budget” process—have their origins in the public financial management structures established by colonial administrations.12 Frequently, finance and development ministries issued their own separate budget circulars, and the dual approach to budgeting also took root in the line ministries. Lack of coordination between the finance and planning or development ministries may also have reflected differences between their ministers and/or heads of state who, in some cases, exercised de facto control of investment decisions and their funding. Such settings made it difficult to introduce consolidated budget presentation and classification systems. Moreover, some substantial but unforeseen recurrent costs evolved from the expansion of investment projects.

Some low-income countries have merged their finance ministries with their planning or development ministries. Line ministries have a strong incentive to prepare and defend separate budgets because they can use the opportunity of donor-negotiated projects to demand further complementary financing and to expand their operations without attention to the future cost implications. These projects may include either capital projects or specific and independent recurrent activities. For line ministries, dealing with two separate central ministries for defending their budgets is more advantageous than dealing with one unified central budget authority, because they can take advantage of the two central ministries’ lack of detailed information.

Today more than ever, the integration of recurrent and development budgets in low-income countries has become a necessity:

• government borrowing is no longer limited to capital expenditures;

• only an integrated analysis of recurrent and development expenditures can identify those poverty-reducing expenditures that have an immediate impact (e.g., social transfers and targeted subsidies and some other social expenditures) or an indirect impact through accelerating economic growth; and

• even after several decades of experience, the recurrent costs of capital projects

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continue to be ignored, due in part to the lack of coordination between two separate budgets.

12 See Webber, 2007, pp. 1–2 for more discussion on the origins of dual budgeting.

13 In some countries, although the Minister of Finance may have presided over the planning commissions or planning ministries, the latter were directed from the presidency. For details, see I. Lienert and F. Sarraf, “Systemic Weaknesses of Budget Management in Anglophone Africa,” IMF Working Paper,

B. The Case for Integration of Current and Capital Budgets

Most OECD countries have achieved a high degree of integration of their current and capital budgets. This has usually occurred through a process of development in their public administration and budgetary systems that has taken place over many decades. It is the result of a growing realization by these governments that (i) the distinction between current and capital spending is often quite arbitrary or uncertain; and (ii) better resource allocation and management decisions can often be made within a single, unified (and medium-term) framework for revenues and expenditures.14 In some developed countries (e.g., New Zealand, Norway, and the United Kingdom), highly sophisticated strategies for managovernment’s stock of capital assets and new investment programs have been developed. The switch from cash-based to accrual-based accounting in some countries has also heightened the importance of efficient management of capital assets and new investment.

Although many developed country administrations may not consciously seek to optimize a current/capital spending balance, they nonetheless aspire to achieve consistency and efficiency within the context of their ongoing resource allocation and budget management decisions. In fact, getting the right balance between current and capital spending across the whole range of budget interventions and activities will depend substantially on the quality of budget planning systems and capabilities. While these issues may involve a much wider range of factors than simply the extent of budgetary integration per se, there is no doubt that a unified budget generally makes it easier to develop better systems, policies, and capabilities in these areas.

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The budget systems of countries with a high degree of integration between current and capital expenditures exhibit several key features:

• a single (combined) annual budget law and appropriation process;

• clear and unified responsibilities for budgetary preparation and implementation

within the relevant public sector institutions;

• the existence of effective and widely employed investment appraisal techniques;

• a unified budget presentation, with supporting classification and accounting systems; and

14 See further discussion of the development of this process in Webber, 2007,

• budget planning and management techniques within individual spending agencies that encourage and enable good use of financial resources.

Most developed countries’ budgetary systems incorporate some of these features. However, the full benefits of a unified budget can only be achieved where each of these conditions is present. And although each of these features is important, it is often in the last area─the budget planning and management within spending agencies─where the most challenging reform measures and greatest gains are to be found.

Medium-Term Approach to Capital Expenditures

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Above-mentioned characteristics of a sound budgetary system are often strengthened by the use of a medium-term approach to public investment. If the sole focus is on preparing and executing the annual budget, the main reasons for pursuing investment projects will be related to short-term macroeconomic effects, for instance on employment, and short-term political considerations. In such a setting, the potential long-term effects of the investments may be accorded little importance. As a result, the capital budget will tend to be underfunded. In addition, project selection will tend to prioritize high-visibility, fast-track projects, not the projects that give the highest benefits over the given lifetime.

Decisions about allocation of resources to different sectors and investment projects should ideally be based on efficiency. What are the benefits compared to the costs of the projects? In the short term, the main focus will tend to be on static efficiency: what are the expected results of allocating resources to certain sectors based on their current capacity to deliver specific public goods and services? In a longer-term perspective, dynamic efficiency becomes more important: resource allocation should also be governed by the possibilities for improving the capacity of the sectors over time, and investment projects will play a critical role in this regard.

Many efforts to extend the time horizon for investment planning include the introduction of medium-term budget frameworks (MTBFs). Currently, many OECD countries prepare comprehensive MTBFs. Few low-income countries have been able to introduce full-fledged MTBFs so far. Experience shows that this type of reform is conceptually and practically demanding. In particular, it has turned out to be difficult for line ministries to develop credible, multi-year budget estimates. PFM Blog http:\\blog-pfm.imf.org

CRITICAL STEPS FOR CAPITAL BUDGET PLANNING, PRIORITIZATION, AND IMPLEMENTATION

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A. Introduction

The following benchmarks should be taken into consideration in budgeting for public investment: (i) determining the resource envelope for expenditures; (ii) efficient prioritization and selection of capital projects; and (iii) efficient implementation of capital projects. The section below highlights some of the main recommendations for efficient budgeting, prioritization, and implementation of capital expenditures.

B. Determining the Resource Envelope

• Capital expenditure decisions should be based on a consolidated budget approach, incorporating all revenues and expenditures, in particular foreign-financed projects and extrabudgetary funds with investment activities.

• Capital expenditure decisions should be based on a medium-term budget perspective.

• Decisions regarding capital expenditures should be taken in the context of a hard

budget constraint. There should be explicit ceilings for commitments beyond the

budget year.

• Governments should have clear policies regarding which types of capital expenditures should be financed by the budget, which may be realized through public-private partnerships (PPPs) and which should be handled by public or private enterprises.

These policies should reflect the cost structure of the activities and the possibilities for user-financing, as well as political priorities.

C. Efficient Prioritization and Selection

• The budget calendar and the procedures for integration of capital expenditures in the budget must be clear, transparent, and stable. Development and analysis of capital

investment proposals should largely be completed before the budget preparation process starts.

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• All projects should be subject to cost-benefit analysis. If the subjection of all projects to cost-benefit analysis is too costly, the focus could firstly be on the larger projects, with using a simplified methodology for smaller projects.

• A public investment agency, with strong links to the Ministry of Finance, should prepare guidelines for project development and analysis. This agency should review PFM project proposals to ensure that they are adequately prepared and analyzed and have the authority to reject projects that do not meet the established technical standards.

• The Ministry of Finance should give the cabinet recommendations for which investment projects should be realized within the available resource envelope.

Ministries should compete for investment funds based on the net social value and political priority of their investment proposals.

• The decision to implement an investment project should be independent of the financing and procurement modalities for the project. PPPs can improve risk allocation, but the benefits must be substantial to compensate for increased financing and transaction costs. Decisions regarding PPPs should be an integral part of the budget process, and PPP arrangements16 should be fully disclosed in budget documents.

D. Efficient Implementation

• Rules for budget adjustments should give incentives for realistic initial capital cost estimates. Cost overruns during project implementation should be partly covered by reallocation within ministries’ existing budgets. In the case of real cost reductions, ministries could be allowed to retain part of these for other additional expenditure needs.

• Capital investment project proposals should only be considered when they include a detailed disclosure of the expected operating costs, indicating how these will be accommodated within existing resource envelopes or making an explicit proposal for additional financing of the operating costs.

• Capital investment project proposals should only be considered after the ministry has explained how it will fully cover the maintenance of its existing capital stock.

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• Governments should avoid excessive targeting of capital expenditures for budget cuts. Decisions on budget cuts should be based on the medium-term budget and take full account of future expenditure pressures.

15 Most Latin American countries have a “National System for Public Investment” (SNIP) whose key feature is an “investment project bank or database,” where the information on investment projects that were evaluated and considered economically viable is recorded.

16 See Schwartz, G., Corbacho, A., and K. Funke, 2008, IMF’s PFM Blog at http://blog-pfm.imf.org. PFM Blog http:\\blog-pfm.imf.org

• There should be project completion reports for all capital expenditure projects. These should form the basis for cross-sectoral analysis and methodology development and continuous improvements in the investment process.

Conclusion

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Using enterprise planning, companies can ensure a consistent set of ROI measures. Project owners justify capital projects based on the same set of criteria, which reduces error and time-loss in the downstream process. Project owners can easily model capital project elements, selecting the right asset types and projecting costs over an appropriate time horizon. Divisional finance can easily perform “what-if” analysis to assess the impact of changes in the timing or amounts of capital outlays to ensure that cash projections fit the divisional financial picture.

Corporate finance can readily consolidate all capital project plans from across all divisions. After approval by executive management, corporate finance can easily create revised income statement, balance sheet, and cash flow projections.

The whole process now takes only a few weeks and is much more reliable.

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Reference

Internet Cost accounting reference book Capital expenditure reference book