Globalization presents challenges to global manufacturing companies. QAD Enterprise Edition helps companies to master these challenges by offering a solution that accommodates international variations in language, financial practices, business practices, and regulatory compliance.

Traditionally, ERP systems provided support to international customers using the localization approach, in which specific solutions were developed for individual country requirements. There is a move away from this approach, however, toward internationalization that is driven by legal considerations and by more cost reduction in total cost of ownership when supporting operations for different countries in a multinational company.

QAD Internationalization addresses these issues by maintaining a single generic product in which processes and systems are standardized, and functions are optimized across a global company. QAD has introduced additional functionality to address requirements that vary globally in the field of costing and inventory valuation.

Multi-country companies need to know the total cost of production at varying levels of output along with per-unit costs. Companies use costing methods for managing business as dictated by business conditions or, in some cases, as dictated by their country’s regulations. These companies must find costing methods and reporting functions that can meet local requirements and business practices when companies calculate inventory, transactions, or cost of goods sold. For example, in some countries, there are legal business and tax audit requirements for period costing, or the concept of standard cost variances may not be allowed.

IFRS guidelines—specifically, IFRS for inventory valuation (IAS-2)—recommend that companies use either specific identification or the periodic cost formulas first in first out (FIFO) or weighted average (WAVG).

Techniques to measure the cost of inventories, such as the standard cost method, can be used for convenience if the results approximate actual costs.

Complexities arise, though, as some countries require WAVG costing, while other countries require FIFO costing.

In some of these countries, the use of standard costing to value inventory is not acceptable, so companies must process inventory movements through the profit and loss account and not directly to the balance sheet.

Even when multinational companies use standard costing for management accounting, internal audit, or performance evaluation requirements, they still require a costing method that provides reporting for legal (end of period) accounting requirements, tax audit, or company requirements of actual costs.

In Periodic Costing, costs are recalculated for each period, and a new actual cost is defined according to what happened during that period—so no amounts need to be posted to variance accounts.

Periodic Costing uses cost-calculation formulas such as WAVG or FIFO that support local legal requirements for certain countries and IFRS guidelines.