Generally Accepted Accounting Principles (GAAP) is the name given to the common set of standards and procedures used to compile financial statements that have been developed by the accounting profession. These standards are generally accepted and universally practiced for transparent and comparable general-purpose financial statements. “Corporations wishing to issue debt or equity securities in a given country are typically subject to its financial reporting standards and legal requirements.
For Example, foreign companies that wish to issue stock on the New York Stock Exchange are subject to SEC reporting requirements and are generally expected to follow, or reconcile their financial reporting to, U. S. GAAP. U. S. corporations face similar requirements overseas. The need to prepare different financial statements for different countries results in additional expense and in many cases, a lack of comparability. ” (Titard, Di Gregorio, 2003) It is mainly these two problems that GAAP overcomes for an international company.
JIT Importance Just-in-Time Costing, sometimes called “backflush costing” or “pull” system, begins with output completed and then assigns manufacturing cost to units sold and to inventories. “When a JIT inventory system is used, finished goods inventory is produced for specific orders and shipped to customers immediately upon completion. Work in process inventory is only started when its completion is required to replace a product that has been finished.
In turn, raw materials are received from suppliers just as they are needed for production. ” (Helmkamp, 1990, p. 50). As such, JIT inventory requires managers to have an extremely efficient supply-chain management to leave no room for errors. JIT is important as it helps managers save the costs, which would otherwise be incurred in following a just-in-case inventory system; these costs include capital investment in equipment required to move inventory, storage space and handling costs.
In addition, JIT inventory would save managers funds tied up in the inventory and invest it elsewhere. Using activity-based costing methods, the otherwise hidden costs incurred in maintaining just-in-time orders can be discovered, ensuring exact cost assignment along with the benefits of a lean JIT inventory. TOC Importance “The Theory of Constraints (TOC) is a production-flow management system. In every system there is one process, known as the constraint, that has the least capacity (or slowest production rate).
Output for the entire system is determined by the production rate of this constraint, or bottleneck. Hence, TOC argues production flow for the entire facility must be planned around the constraint. ” (Marco, 2006) Theory of Constraints is also a pull system; only it is based on identifying and optimizing the bottleneck. Thus, other processes are subordinated to the constraint. TOC also improves flow and reduces excess work-in-process inventory by releasing materials only for those products that are sold.