Sherwood Lane Lambert

Relevance of Goodwill Impairments to Cash Flow Prediction and Forecasting

This study examines the contribution of goodwill impairment information to the prediction and forecasting of future operating cash flows. Extending the framework of Barth, Cram, and Nelson, we find that explicitly including goodwill impairments incrementally improves 1-year-ahead cash flow prediction and forecasting. Improved cash flow forecasting is present over the entire 2001-2009 study period as well as for each year within the study window. In addition, goodwill impairments retain their significance and predictive power when other non-recurring charges (e.g., restructuring, asset write-downs, and merger and acquisition costs) are added to the model, both individually and aggregately, and when market-related information (i.e., change in market capitalization) is included in the model. While these findings are validated by in-sample prediction techniques, this study is also one of only a few studies to investigate the incremental, out-of-sample predictive power of non-current accruals on reported (as opposed to computed) operating cash flows. Analysts, investors, creditors, and others interested in future cash flows should separately consider goodwill impairment information, when available, to improve the accuracy of cash flow prediction and forecasting.

Assembly FG: An Educational Case on MRP II Integrated within ERP

This case teaches students how discrete (job order) manufacturing companies use Manufacturing Resource Planning (MRP II) within Enterprise Resource Planning (ERP) systems to plan purchase orders for direct materials and shop orders for work-in-process and finished goods. Students simulate MRP II integrated within ERP, using Microsoft Excel to learn MRP IIs bill-of-materials (BOM) Explosion that plans order quantities and MRP IIs scheduling logic that uses lead-times to determine start dates for planned orders. Students explain why MRP II is most practical and effective when executed within ERP and how MRP II can reduce excess inventories, prevent inventory shortages, and help companies deliver quality products to customers on schedule. Also, students explain why BOM, inventory, and lead-time inaccuracies can adversely affect the accuracy of MRP II-planned replenishments and identify controls that reduce the risks of these inaccuracies.

Development of tactical solutions for the e-credit card issuing industry

Purpose This paper aims to develop a set of tactical electronic business solutions for the electronic credit card issuing industry. Design/methodology/approach Specifically, a strategic credit card issuing (SCCI) model is developed to analyze e-business in the credit card issuing industry. Second, a set of tactical solutions is derived on the basis of the SCCI model. Third, pattern analysis is conducted on the basis of data collected from dominant credit card issuing companies to further investigate the implementation status on these electronic business solutions in the credit card issuing industry. Findings The findings show that three categories of electronic business solution items can be classified. The average variability of electronic business implementation patterns for business-to-business, business-to-customer and business-to-internal in each company shows a variety of electronic business strategies implemented by these dominant companies. Originality/value The results will help managers and executives when they make strategic and tactical decisions on electronic business in the credit card issuing industry.

Assembly FG: An Educational Case on MRP II and ERP

This educational case teaches students how discrete manufacturing companies use Manufacturing Resource Planning II (MRP II) within an Enterprise Resource Planning (ERP) system to plan purchase and production orders. In addition, students learn how ERP uses cost rollup controlled by a multi-level bill-of-materials (BOM) to cost work-in-process and finished goods parts. Using Microsoft Excel, students implement the “BOM explosion” logic used in MRP II to plan order quantities and start dates for purchase orders and production orders. By learning MRP II and cost rollup logic, students better understand why inaccuracies in computerized BOM or inventory records can lead to poor materials planning, material shortages, increased production costs, delayed shipments, excess and obsolete inventory, and inaccurately costed work-in-process and finished goods parts. The learning process and benefits of using the case in an Accounting Information Systems (AIS) or Cost Accounting course are discussed. Teaching Notes on how to administer the case and suggested answers for the exercises that follow the case are presented. Evidence of teaching effectiveness of the case is also included.