Benefits Calc on Financial Services New Business

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    We cuurently do not have a sound methodology to calc benefits on new financial products or geographic expansion into new markets. We current only allow 12 months of benefits for any project. This creates a problem because all transactions have a term of 48-60 months. So, we only take 12/48th of any benefit…plus we only take the net/net margin that is reportable to the P&L. Bottomline is vey small benefits reported to corporate. I am a MBB with major financial service company. Is anyone else facing the same issue or have you developed a better mousetrap?



    Accounting on yearly basis of benefits is perfectly in line with principal of conservatism and prudence of accounting. But then methodology applied of division directly by 4 is not appropriate.
    Though pain staking one has to identify the total tenure of the projects and time frame in which benefits are to be reaped in.
    Secondly one has to assess the work done during the period of reporting. One has to find out the percentage of work done and equivalent share of revenue to the percentage of job done also identify the relevant cost for getting job done. Due importance should be given to any inventories left around for subsequent years work and also provision has to be made for future contengencies based on industry norms.
    Another option to find viability of projects and its earning is cash flow generation to the expenses and getting it converted into the real cash flow with the future assessment of cash and converting into real cash flow one can assess the Revenue generation at different point of years on real terms. however this method will be for the decision aspect and not for accounting aspect as conversion future earning in real value and accounting all in current year is not at all acceptable  or in other words will lead to enron like debacle.

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