International Telecommunication Union
TALMaster
Group title style
Click to edit
•
•
•
•
•
ClickSeminar
to edit Master
text styles
on Costs
& Tariffs
Second
level Quintana Roo, Mexico
Cancun,
Third level
Fourth level
Presentation
by
Fifth level
John Thompson
&
Gary Kalloo
1
Click to edit Master title style
•
•
•
•
•
Click to edit Master text styles
Second level
Third level
Fourth level
Fifth level
Developing a
Cost Ledger
2
•
•
•
Agenda
Click
to
edit
Master
title
style
Do preamble
Define objective
•
Click
to
edit
Master
text
styles
Establish a case for the cost ledger
•– Identify
Secondshortcomings
level
of using Financial General Ledger
format
•– Present
Third level
techniques used to unravel and reassemble data
in financial
• held
Fourth
level accounting format
• Develop the characteristics of the Cost Ledger
•– Through
Fifth level
comparison with Financial Ledger
• Define the structure of the cost ledger
• Define practical procedures to create and maintain
the cost ledger
3
Click to edit Master title style
•
•
•
•
•
Click to edit Master text styles
Second level
Third level
Fourth level
Fifth level
Preamble
4
Regulator - Economic Focus
Click to editRoleMaster
of Regulator title style
Regulator
Telecom Act/ Duties
Enshrined
• Click to edit Master text styles
Social Benefits
•New legislation
Based onlevel
economic
• Second
•Litigation
feasibility
•Lobbying
•Protest
• Third level
• Fourth
Policies
level
of
control and
Conflicts with
development
• Fifth level
Int’l Telecom
stakeholders,
Agreement
•ITU
•WTO
Competition
Law
Industry/Business
opportunities based on
economic benefits
Policies of
control and
development
gov’t, consumers
& new entrants
Universal Service
Effective level of
USO
•Effective
competition
•Acceptable ROI
Regulatory
Equilibrium
5
Regulator’s Perspective
•
Click
to
edit
Master
title
style
Underlying each mandate of the regulator is an
economic element to be addressed
• Click to edit Master text styles
• Complexities of the industry make it difficult for
• Second to
level
regulators
gain a holistic view
• Third level
• Need to simplify information required to make
• Fourth level
decisions
• Fifth level
• Areas where simplification can benefit regulators:
• Accounting & Costing
– Accounting Separation
– Monopoly subsidies
– Price Cap
– Cost allocation mechanism
6
Objective
Click to edit Master title style
• Click to edit Master text styles
Tolevel
present a case for
• Second
maintaining
a cost ledger as
• Third
level
• the
Fourthsource
level
of input data for a
• Fifthtelecom
level
costing model.
7
Click to edit Master title style
•
•
•
•
•
Click to edit Master text styles
Second level
Third level
Fourth level
Fifth level
Establishing a case for the
cost ledger
8
Defining the Challenge
Click
to
edit
Master
title
style
WTO Agreement
•
• Principle of Agreement - cost based pricing
•
Click
to
edit
Master
text
styles
• Cost modeling prerequisite
Second
level costs associated with regulatory
• • Need
to control
• compliance
Third level
• Regulator imposing requirements without being
• mindful
Fourth of
level
associated costs
Tradeoff
• –Fifth
levelbetween “quality of information ” Vs “cost to
providing information”
• All telecom organizations faced with the challenge
of using data from financial accounting sources, to
input to cost models.
9
Current Cost Modeling Structure
Click to edit Master title style
Data Source
Statutory General Ledger
• Click to edit Master text styles
Network Cost
• Second level
Data Analysis
Activity Cost Analysis
Analysis
• Third level
•Cost Ledger mapping Rules
System Rules
•Cost driver Rules
•
Fourth
level
Development
• Fifth level
Opex
Assets
Cost Model
Application
Cost Outputs
Costing Model
Cost by Product &
Service
10
Network Costing Model Concept Overview
UsingMaster
FA Datatitle style
Click to edit
•
•
•
•
•
Click to edit Master text styles
Second level
Third level
Fourth level
Fifth level
PLANT ACCOUNTS Depreciation
2CIDC
2CIDM
2CIPO
2CITM
2CNAN
2CNCS
2CNDC
2CNDM
2CNFO
2CNPO
2CNTM
COE Data Communications - International
COE Digital Multiplex - International
COE Power - International
COE Transmission - International
COE Stored ProgramAnalog - National
COE Cell Sites/Network - National
COE Data Communications - National
COE Digital MultiPlex - National
COE Fibre Optic - National
COE Power - National
COE Transmission - National
3SIPX
3SNCB
3SNCN
3SNCP
3SNPX
3SNTE
3SNTX
Sapp
Sapp
Sapp
Sapp
Sapp
Sapp
Sapp
4OIDU
4ONAC
4ONDU
4ONFC
4ONPL
4ONUC
OP underground Conduit - International
OP Aerial Cable
OP Underground Conduit
OP Fibre Optic Cable
OP Pole Lines
OP Underground Cable
PABX - International
Booths - Card
Station Connections
Booths - Coin
PABX - National
Telephones
Telex
9IAMR
America's I
1BIFH
1BILH
1BNFH
Buildings Freehold - International
Buildings Leasehold - International
Buildings Freehold - National
Insurance
Study may be
required to
restructure
Plant Accounts
SERVICES
TECHNOLOGY ELEMENTS
AND FUNCTIONALITY (USED
AND UNUSED) SUCH AS:
TECHNOLOGY GROUPS
LOOP - STRUCTURE
LOOP - COPPER CABLE
CUSTOMER PREMISES CONNECTIONS
POLES
INTEROFFICE
INTEROFFICE - COPPER CABLE
INTEROFFICE - FIBRE
TELEPHONE TRANSMISSION
DATA TRANSMISSION TOTAL
CELLULAR TRANSMISSION EQUIPMENT
SWITCHES - TYPES AND LOCATIONS
LOOP RELATED SWITCH ELECTRICITY
AERIAL CABLES
UNDERGROUND CABLES
SWITCH - CELLULAR
SWITCH - ITSC TEXTEL
SWITCH - ITSC NELSON
SWITCHED DATA SERVICES
SWITCH EQUIPMENT FOR OTHER SERVICES
SWITCH SUPPORT
TRANSMISSION
LINE TERMINATIONS
DEDICATED INT'L EQUIPMENT
OPERATOR EQUIPMENT
CARD PHONE EQUIPMENT
PREPAID INT'L CALLING CARD EQUIPMENT
CUSTOMER PREMISE EQUIPMENT
TRUNK TERMINATIONS
CUSTOMER PREMISE EQUIPMENT
CELLULAR ACCESS EQUIPMENT
CELLULAR SWITCHING EQUIPMENT
SIGNALLING & SETUP
CALL HOLD
TELEX EQUIPMENT - SWITCHING EQUIPMENT
TELEX EQUIPMENT - CPE
MOBILE RADIO EQUIPMENT
ETC..
COST POOLS:
The Technology Elements and Functions are
grouped according to their functionality and
cost causality
COST POOLS...
Call Setup and signalling-used Total
Call Setup and signalling - unused Total
Class Equipment Total
CPE Total
Dedicated Card Phone Total
Dedicated International Total
COST POOLS...
Dedicated Operator Equipment Total
Dedicated Operator Service Equipment Total
IOF Cellular Total
IOF Dedicated Data Total
IOF Dedicated International Total
IOF Internet Total
IOF ship to shore Service Total
IOF Special Services Total
IOF Unused Total
COST POOLS...
IOF Used Switched Transport Total
IOF Wireless Service Total
Loop Distance Sensitive Costs Total
Loop Line Sensitive Costs Total
Loop Unused Line Sensitive Costs Total
Mobile Radio Equipment Total
Switched Data Services
Telex service Total
Voice Mail Total
Specify studies needed to identify and group
network elements along functional lines
COST DRIVERS
Network
TELEPHONY -bus/res
TELEPHONY - corporate
TELEPHONY - International Incoming
TELEPHONY - International Outgoing
INWATS - Local
INWATS - International
CARDPHONE - National
CARDPHONE - International
VOICE MAIL TOTAL
TELEX SERVICES TOTAL
SWITCHED DATA SERVICES
MOBILE RADIO EQUIPMENT TOTAL
IOF WIRELESS SERVICE TOTAL
IOF SPECIAL SERVICES TOTAL
IOF SHIP TO SHORE SERVICE TOTAL
IOF INTERNET TOTAL
DEDICATED INTERNATIONAL
SERVICES
IOF DEDICATED DATA TOTAL
IOF CELLULAR TOTAL
OPERATOR SERVICES
CPE - TOTAL
CLASS EQUIPMENT TOTAL
etc.
Access Lines Miles in Service
Available (Number of Lines per Service)
Traffic Usage for International Service
IOF Network Minutes of Use
Call Attempts
Direct
Specify studies required to identify and
collect appropriate cost drivers
TYPICAL NETWORK SERVICES
MODEL
CONCEPT DIAGRAM
11
For illustrative purposes only
Source: TSTT
Modeling the Network Costs
Click-toUsing
edit Master
title style
FA Data
Overview of NASM Cost Architecture for (PSTN) Fixed Network
Click to edit Master text styles
Second level
Third level
Fourth level
Fifth level
• Opening &
Closing Net
Book Values
• Depreciation
Charge for the
period
• Date of
Commissioning
of Assets
Reclassify to
Technology Groups
Classify plant account
records into following
technology groups and
determine annualized
capital cost
Underground Conduit
Local Loop
Cable
etc.
Determine
weighted
average cost of
capital
Apply cost drivers and
routing factors
Cost Pool
Determine
network cost of
services
Cost Driver
Services
Loop
distance
# lines in service
Line miles in service
sensitive
costs
Line termination
Minutes of Use
Signalling
Signalling and Setup
& Setup/
No. of call attempts
Routing Factors
Switch
Group Elements into
Cost Pools
Element / Functionality
Poles
Determine capital
works in progress
by asset class
Identify network
support costs
from general
ledger
Unbundle Technology
Groups to Technology
Elements
Technology
Annualized
Capital
Cost
Engineering Studies
•
•
•
•
•
Sources of Data
Extract following
data from the
Plant Accounts
Services
Trunk Termination
Minutes of Use
Conveyance
Transmission
Electronics
Satellite Equipment
Direct
Microwave Equipment
Fibre Optic Equipment
FOR ILLUSTRATIVE PURPOSES ONLY
12
Source: TSTT
Modeling the Network Costs
Click toUsing
edit Master
title style
FA Data
Overview of NASM Cost Architecture for Mobile Network
Sources of Data
Extract following
data from the
Plant Accounts
Unbundle Technology
Groups to Technology
Elements
Group Elements into
Cost Pools
Apply cost drivers and
routing factors
Click to edit Master text styles
Second level
Third level
Fourth level
Fifth level
• Opening &
Closing Net
Book Values
• Depreciation
Charge for the
period
• Date of
Commissioning
of Assets
Identify network
support costs
from general
ledger / HABM
Determine
weighted
average cost of
capital
Cost Pool
Determine
network cost of
services
Cost Driver
Services
Element / Functionality
•Control Channel
•Radio Unit
•Controller
Cell Site
•Locate Receive Channel
•Traffic Channel
•Registrations
•Call Processing
Access
No. of subscribers
•Hand-off Requests
Dedicated
Prepaid
Platform
MTX
Signalling
Network
•Access
•Registrations
•Call Processing
•Inter ICP Hand- offs
•CM
•Registrations
•ICP
•Call Processing
•Hand-off Requests
•DSPM
•Inter ICP Hand- offs
•Conveyance
•Switching
Network
•ICP to ICRM
interface
Minutes of Use
Signalling
& Setup
No. of call attempts
•Call Processing
•Control Channel-
Utilization Factors
Determine capital
works in progress
by asset class
Technology
Annualized
Capital
Cost
Engineering Studies
•
•
•
•
•
Reclassify to
Technology Groups
Classify plant account
records into following
technology groups and
determine annualized
capital cost
Services
•Locate Receive Channel
•Traffic Channel
•DTC
•Traffic - mobile to land / land to mobile-
•STPs
Last Mile Link
•Conveyance
•SS7 links
•Control Channel
Shared Fixed
Line
Transmission
Electronics
Minutes of Use
•Signalling and Setup
•Fibre
•Satellite
•Microwave
Conveyance
•Locate Receive Channel-
Direct
•Traffic Channel
•Control Channel
•Locate Receive Channel
•Traffic Channel
•Fibre Optics
FOR ILLUSTRATIVE PURPOSES ONLY
13
Source: TSTT
Modeling GL Recurrent
Click to edit
MasterFA
titleData
style
Expenses
- Using
Cost Architecture
Click to edit Master text styles
Second level
cost
pools
Third level
cost
pools
Fourth level
cost
pools
Fifth level
Redistribute
Redistribute
centralised
centralised
Costs
from
General
Ledger
costs
costs
totoreflect
reflect
fully
fully
burdened
burdened
cost
costcentre
centre
cost
cost
Facilities
Sustaining
Plant
Accounts
Depreciation
E.g..
Transport,
E.g..
Transport,
Materials
Materials
Mgmt,
Mgmt,
Electricity
Electricity
Network
Services Model
(NSM)
Capital Pools
Activity
Activity
Activity
Activity
cost
pools
Allocate costs to activity cost pools
•
•
•
•
•
Service
Cost Drivers
Cost Drivers
Service
Service
Service
Cost Drivers
Cost Drivers
Service
Service
Depreciation, occupancy, electricity and other network
costs charged to services using Network Services Model
14
For illustrative Purposes Only
Source: TSTT
Analysis of General Ledger
Click Analysis
to editofMaster
title
style
General Ledger
Click to edit Master text styles
General
Second level
Ledger
Third level
Cost Architecture
Fourth level
Fifth level
Capital Pools
Activity
Costs
from
General
Ledger
Redistribute
Redistribute
centralised
centralised
costs
costs
to reflect
to
fullyreflect
fully
burdened
burdened
cost centre
cost centre
cost
E.g.. Transport,
cost
Materials
E.g..
Transport,
Mgmt,
Materials
Electricity
Mgmt,
Electricity
Facilities
Sustaining
cost
pools
Activity
cost
pools
Activity
cost
pools
Allocate costs to activity cost pools
•
•
•
•
•
• Effect analysis of
general ledger costing
structure and content
as primary factor to
costing system.
• Develop preliminary
assumptions to:
– identify centralized
general ledger cost
– allocate centralized
costs to arrive at
fully burdened cost
center costs
• Develop
allocations/costs
assignment rules
Depreciation
Service
Service
Cost Drivers
Service
Service
Cost Drivers
Activity
Service
cost
pools
Cost Drivers
Plant
Accounts
Service
Cost Drivers
Service
Network Services
Model (NSM)
Depreciation, occupancy, electricity and other network costs charged to
services using Network Services Model
15
Source: TSTT
Modeling GL Expenses - Example
Click to edit Master title style
HRDP
OCC
HOD’s
00051
HRDP
40%
40%
00048
00049
•
•
•
•
•
30%
Forecast
Traffic
Growth
04.03.03
#Traffic Streams
FTG
Traffic
Engineering
International
Traffic
Hours
20%
Click to edit Master text styles
Second level
Third level
Fourth level
Fifth level
Hours
25%
Determine
Facility
Requirement
04.03.04
25
25%
Coordinate Trunk
Conduct Special
Enhancement
Traffic Studies
Program
04.04.03
04.04.04
#Traffic Streams #Traffic Minutes
DFR
10%
25%
5%
20%
Manage Traffic / Administer Int’l
Declared Minutes Declared Traffic
Database
Streams
CSS
#Traffic Minutes
CTE
MTD
HRDP
Administer Route Plan Peak Day
Bulletins
Requirement
#Traffic Streams
#Traffic Minutes
#Traffic Minutes
Manage
Traffic
Routings
ADT
MTR
25%
10%
Manage Int’l
Facilities
#Traffic Minutes
#Traffic Minutes
ARB
#Traffic Minutes
PPR
MIF
OCC
Domestic Switch Summary(50%) Conveyance Summary (50%)
Int’l Switch Summary (25%) Int’l Conveyance Summary (75%)
Network
Control
HRDP OCC
Network
Efficiency
Hours
0005
0
70%
Manage Route
Traffic
#Traffic Minutes
MTR
00052
30%
Plan Disaster
Recovery
Hours
PDR
16
Domestic Switch Summary (20%) , Domestic Conveyance (30%)
Int’l Switch Summary (20%) Int’l Conveyance Summary (30%)
For illustrative purposes only
Source:TSTT
General Consensus
Click to edit Master title style
• Click to edit Master text styles
•Financial
Second level accounting data is
• not
Third readily
level
compatible with
• Fourth level
the needs of cost models.
• Fifth level
17
Alternative Options
Click to edit Master title style
• Start from the Financial Ledger and drive directly
to
• services
Click tousing
edit costing
Master engine.
text styles
• Second level
• Start with Financial ledger and convert to cost
• Third
levelbefore driving to services.
ledger
format
• Fourth level
• Develop a separate cost ledger posted from the same
• Fifth
levelin tandem with Financial Accounting.
data
source,
18
Click to edit Master title style
•
•
•
•
•
Click to edit Master text styles
Second level
Third level
Fourth level
Fifth level
Developing the characteristics
of the Cost Ledger
19
Click to edit Master title style
• Click to edit Master text styles
• Second level
Exploring
Alternative
1
• Third level
• Costing
Fourth level Ledger Approach
• Fifth level
20
Alternative 1
Click to edit Master title style
• Click to edit Master text styles
Develop a separate cost ledger posted
• Second level
from the same data source, in tandem
• Third level
with Financial Accounting.
• Fourth level
• Fifth level
21
Modeling Structure
Statutory
G/L
Click to edit
Master
title style
- Classified for Financial Reporting
Conversion to costing classification
•
Click
to
edit
Master
(Assets &text
OPEXstyles
Only)
Data Source
- Produce Cost Ledger Chart of Accounts &
• SecondCosting
levelAsset Register Format
•
Third
level
Network
Cost Analysis
Activity Analysis
Data Analysis
• Fourth level
•Cost Ledger Updated
System Rules
•
Fifth
level
•Cost driver Rules
Development
Cost Model
Application
Costing Model
Cost Outputs
Cost by Product &
Service
22
Statutory General Ledger &
ClickLedger
to edit Master
title style
Cost
- Comparison
•
•
•
•
•
Account Category
Statutory Ledger
Current Assets
Represented
Current Liabilities
Represented
Cost Ledger
Individual
accounts
not
represented
Materials and Supplies represented
Represented
Net Working Capital
Not represented as an Represented as a single account
individual account
(net current assets –excluding
materials and supplies, minus, net
current liabilities
Fixed Asstes
Represented:
Represented:
Fixed Assets
Fixed Assets
• Land & Building
• Telephony
• Plant
&
o Switching
Equipment
o Trans.
• Other Assets
o Access
o Other
Amortisable-Assets
Represented
Represented
(tangible
and
intangible)
Click to edit Master text styles
Second level
Third level
Fourth level
Fifth level
Provisions
and Represented
Deferrals
Long Term Liabilities
Represented
Shareholders Equity
Represented
Individual
represented
Represented
Not represented
Not represented
accounts
not
23
Account Classifications Click
to edit Master
title style
Financial
& Costing
•
•
•
•
•
Account Category
Statutory Ledger
Cost Ledger
REVENUES
Represented
Not represented
EXPENSES
ClickOPERATING
to edit
MasterRepresented
text styles Represented but
different
• Salaries & Allowances
classifications
• Subsistence & Overtime
Second
level
required
• Pension
• Maintenance & Repairs
• Contracts
Third
level
Rentals
•
• Electricity
Fourth
level
• Insurance
Training
& Foreign Travel
•
Fifth•• Stationary
levelServices
Janitorial
• Advertising
• Account Classifications in Financial Ledger not conducive to
required classifications for costing ledger
• This poses extremely difficult and time consuming task
24 of
conversion
Financial -vs- Costing ClickClassifications
to edit Master title style
•
•
•
•
•
Financial Accounting
Classification - By
Click
to edit Master
Type of Expense
Second
level
Statutory Structure
• Salaries
and Allowances
Third
level
• Subsistence and Overtime
• Pension
Fourth
leveland Repairs
• Maintenance
• Contract
Fifth
• Rentals
level
•
•
•
•
•
•
•
Electricity
Insurance
Training & Foreign Travel
Stationary
Janitorial Services
Advertising
Other operating expenses
Cost Accounting
Classification - Functional
Vs styles
text
FCC Structure
•
•
•
•
•
•
•
Plant specific Expenses
Plant non-specific Expenses
Access network expenses
Marketing
Corporate operating
expenses
Secondary services
Retail related Services
Each of these can be further
divided in sub accounts
25
Plant Specific Expenses Click
to editBroken
Master title
style
Further
down
Based on FCC Structure
•
•
•
•
•
Click to edit Master text styles
Plant
Specific
Expenses
Second level
Related sub accounts
Third
levelsupport expenses
• Network
• General
Support expenses
Fourth
level
• Central office switching expenses
Fifth
level
• Operator systems expenses
• Central office transmission expenses
26
Financial G/L Asset Categories - FAR
Click to edit Master title style
•
•
•
•
•
Asset
Class
1BIFH
1BILH
1BNFH
1BNLD
1BNLH
1BOLH
1TITW
1TNTW
2CIDC
2CIPO
2CNPO
2CITM
Category
1ABLG
1BBLG
1DBLG
1EBLG
1FBLG
1GBLG
1HTWR
1ITWR
2ACOE
2BCOE
2CCOE
2DCOE
2DCOE,
2BCOE,
1BBLG,
1ABLG
2FCOE
2GCOE
2GCOE
2GCOE
2GCOE
2HCOE
2JCOE
2JCOE
2JCOE
2KCOE
2LCOE
Description
Bldgs Freehold - Intl
Bldgs Leasehold - Intl
Bldgs Freehold - Natl
Bldgs Leased - Natl
Bldgs Leasehold - Natl
Bldgs Leasehold - Natl/Intl
Towers - Intl
Towers - Natl
Coe Data Comms - Intl
Coe Power - Intl
Coe Power - Natl
Coe Transmission - Intl
Click to edit Master text styles
Second level
Third level
Fourth level
Fifth level
2CITM
2CNDC
2CNDM
2CNDM
2CNDM
2CNDM
2CNFO
2CNTM
2CNTM
2CNTM
2CICB
2CIDM
Earth Station
Coe Data Comms - Natl
Coe Digital Mux - Natl
Internet
ISDN
1-800
Coe Fibre Optic - Natl
Coe Transmission - Natl
Wireless Local Loop
Microwave
Coe Cross Bar - Intl
Coe Digital Multiplex - Intl
27
For illustrative purposes only
Source: TSTT
Financial G/L Asset Categories - FAR
Asset
Class
2CIDM
2CIDM
2CNAN
2CNCS
3SIPX
3SNCB
3SNCP
3SNCN
3SNPX
3SNTE
3SNTX
3SNCH
4ONAC
4ONDU
4ONPL
4ONUC
4OIDU
4ONFC
5PITE
9IAMR
Total
Click to edit Master title style
•
•
•
•
•
Category
Description
2LCOE Coe Digital Multiplex - Intl
2LCOE International Switch
2MCOE Coe S/Prog Analog - Natl
2NCOE Coe Cell Sites/Netwk - Natl
3ASAP Sapp PABX - Intl
3BSAP Sapp Booths - Card
3BSAP Sapp Booths - Coin
3CSAP Sapp Station Connections
3ESAP Sapp PABX - Natl
3FSAP Sapp Telephones
3GSAP Sapp Telex
3SNCH Sapp Cellualar Handsets
4AOSP OP Aerial Cable
4BOSP OP Underground Conduit
4COSP OP Pole Lines
4DOSP OP Underground Cable
4EOSP OP U/ground Conduit - Intl
4FOSP OP Fibre Optic Cable
5BP&M Total
P.& M. Test Equipment
9AAMR America's I
Click to edit Master text styles
Second level
Third level
Fourth level
Fifth level
2GCOE
2GCOE
2GCOE
2GCOE
Switch Special Services - Voice Mail Platform
Switch Special Services - Tops Service/Ain
Switch Special Services - Call Management Services
Switch Special Services - Class Equipment Services
28
For Illustrative purposes only
Source: TSTT
Fixed Asset Register - Costing
Structure
Click toLedger
edit Master
title style
•
•
•
•
•
Asset Category
Level 2
Cellular
Cellular -Switching
Level 3
Level 4
Click to edit Master
text styles
Cellular - Transmission
Second level Cellular – Cell site
Cellular – Power
Third level Cellular - Buildings
Fourth level Cellular – Interconnect Equip.
Fifth level Cellular - Land
Cellular - Towers
• Costing Ledger constructed along technologies and can undergo several
levels of disaggregation based on elements, functionality and even services.
• Easier to drive costs to services based on how these services consume
29 the
various activities/functionalities performed by the network elements
Fixed Asset Register Costing Ledger Structure
Click to edit Master title style
Central Office Equipment Reclassification - Example
Asset Code
LEVEL 1
25 CENTRAL OFFICE EQPT.
26
27
28
29
30
31
32
33
34
35
36
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
•
•
•
•
•
LEVEL 2
LEVEL 3
LEVEL 4
COE - Digital International Gateway
International Gateway Switch - Nelson
International Gateway Switch - Couva
Click to edit Master text styles
Second level
Third level
Fourth level
Fifth level
COE - Digital Switching National
Nelson 200 Total
Nelson 100 Total
Dedicated Interconnection Equipment
COE - Power National
COE - Power International
COE - Intelligent Networks
COE - ISDN
Operator Systems
Internet Systems
Voicemail Platform
Audiotext/Infozone
Call Master Systems
Signalling Systems
Signalling - National
Signalling - International
30
For illustrative purposes only
Source: TSTT
Fixed Asset Register - Costing Ledger Structure
Data Equipment Reclassification - Example
Asset Code
139 DATA
140
141
142
143
144
145
146
147
148
149
150
151
152
153
154
155
156
157
158
159
160
161
162
163
164
165
166
167
168
169
170
171
172
173
174
175
176
177
178
179
180
•
•
•
•
•
Click to edit Master title style
LEVEL 1
LEVEL 2
LEVEL 3
LEVEL 4
Data Communications National
ATM Switching Nodes (36170s)
ADSL
SDSL
Wireless Broadband
IP Service
Newbridge Equipment ( 3600s,3645s)
Click to edit Master text styles
Second level
Third level
Fourth level
Fifth level
Frame Relay
TDM Service
ISDN Longlining
HDSL
IP Service
ATM - ADSL
RAD Equipment
Fractional - T1 Service
DPN 100
X25 Service
DE4E Smart Channel Banks
TDM Service
Data Communications International
Gateway Node (Passport Equipment)
Frame Relay (GMDS)
DPN 100
X75 Service
Frame Relay
31
For illustrative purposes only
Source: TSTT
Fixed Asset Register Costing Ledger Structure
Click to edit Master title style
Transmission Equipment Reclassification - Example
Asset Code
LEVEL 1
183 TRANSMISSION
184
185
186
187
188
189
190
191
192
193
194
195
196
197
198
199
200
201
202
203
204
205
206
•
•
•
•
•
LEVEL 2
Click to edit Master text styles
Second level
Third level
Fourth level
Fifth level
LEVEL 3
LEVEL 4
Transmission National
Fibre Optic Systems
FOTS Cabling
FOTS Terminal Equip.
Multiplexing Equipment
Radio Systems
Radio Terminal Equip.
Multiplexing Equipment
Cable Carriers
Cable
Terminal Equipment
Transmission International
Transmission Submarine Cable Sys.
Americas 1
Eastern Caribbean Fibre Optic System
Americas 2
Transmission Earth Station & Satellite Sys.
Ship to Shore Eqpt.
VSAT Services Eqpt.
32
For illustrative purposes only
Source: TSTT
Fixed Asset Register
Costing Ledger Structure
Outside Plant Equipment Reclassification - Example
Click to edit Master title style
Asset Code
LEVEL 1
208 OUTSIDE PLANT
209
210
211
212
213
214
215
216
217
218
219
220
221
222
223
224
225
226
227
228
229
230
231
232
233
234
235
236
•
•
•
•
•
LEVEL 2
LEVEL 3
LEVEL 4
Outside Plant - Interoffice
OP Aerial Fibre Cable
OP Underground Fibre
OP Underground Conduit - National
OP Underground Conduit - International
OP Pole System
Click to edit Master text styles
Second level
Third level
Fourth level
Fifth level
Outside Plant - Local Loop Feeder
OP Aerial Cable Metal
OP Aerial Fibre Optic Cable
OP Underground Cable Metal - Ducted
OP Underground Cable Metal - Direct Buried
OP Underground Fibre Cable - Ducted
OP Underground Fibre Cable - Direct Buried
OP Underground Conduit System
Outside Plant - Local Loop Distribution
OP Aerial Cable Metal
OP Aerial Fibre Optic Cable
OP Underground Cable Metal - Ducted
OP Underground Cable Metal - Direct Buried
OP Underground Fibre Cable - Ducted
OP Underground Fibre Cable - Direct Buried
OP Underground Conduit System
OP Pole System
Access Network - Wireless Local Loop
Access Network - Pair Gain Systems
Access Network - FTTC
Access Network - Subscriber Radio Systems
33
For illustrative purposes only
Source: TSTT
Alternative 1 - Challenges
Click to edit Master title style
Challenges
•
•
•
••
•
•
Click to edit Master text styles
Requires participation from a wider cross
Second
section level
of the organization
Third
level procedures must be
Data capture
Fourth
level and need proper streamlining
continuous
Fifth level
34
Alternative 2 - Challenges
Click
to edit Master
title
style
Start
with Financial
ledger and
convert
to cost
ledger format before driving to services.
• Click to edit Master text styles
• Second level
Challenges
• Third
level an appropriate methodology
• Finding
• Fourth
level
• Reclassification
from one to the other can
• Fifth
level
be difficult
to set up and carry out
• Process could be time consuming
• Not Flexible
35
Alternative 3 -Challenges
StartClick
from theto
Financial
Ledger and
drivestyle
directly to
edit
Master
title
services using ABC engine.
•
Click
to
edit
Master
text
styles
Challenges
• Second
level
• determining/collecting
relevant drivers from
company
• Third
level databases
• Account structure/ and the classification of the
• Fourth
level
expenses
require further disaggregation in order
to apply
• Fifth
levelappropriate/single drivers
• Development of ABC is time consumingActivity and cost driver analysis, GL mapping
rules
36
Click to edit Master title style
•
•
•
•
•
Click to edit Master text styles
Second level
Third level
Fourth level
Fifth level
Define the structure of the
cost ledger
37
Click to edit Master title style
•
•
•
•
•
Click to edit Master text styles
Adopting
Alternative 1 Second
level
Third level Ledger Approach
Costing
Fourth level
Fifth level
38
Prerequisite to
Click
to editCost
Master
title style
Network
Modeling
· Network asset numbering scheme
Click verification
to edit Master
text
styles
·•Physical
of assets,
and,
comparison with their
entry in the Asset Register, with respect to: description,
• classification
Second level
and asset life
Third level
·•Reconciling
and adjusting asset costs as per Asset Register
with asset costs as per General Ledger, considering asset
• class
Fourth
level
and accumulated depreciation
• Fifth level
39
Reconciling Physical count
with
Asset
Register
Click
to edit
Master
title style
• Update and amend Asset register with the results of a
physical verification exercise. Complete Asset identification
• Clickand
tonumbering.
edit Master text styles
labeling
·
·
• Second level
Assets found in the field that are not traceable to the asset
• Thirdshould
levelbe, noted for examination.
register
• Fourth level
Conversely, assets in the Register not found in the field must
• Fifth
level
also
be noted
for examination.
· Having satisfied examination of the above assets decisions
must be made as to their final treatment.
40
Reconciling Asset Register with
Click
edit Master
title style
GLtoAsset
Accounts
• All decisions must be supported by any available and verifiable
• Click toevidence,
edit Master
text styles
documentary
or, by management
statements as to their agreed
dispensation.
•
·
• Second level
Dovetail asset costs as per G/L with the asset costs as per Asset Register,
• category
Third –level
by
at this stage all fully depreciated assets not still in use
should be disposed using the formal accounting treatment for disposal of
• Fourth level
assets.
• Fifth level
Any excess of deficit resulting from the comparison of assets in the
Register to assets in the field must, be treated from an accounting
perspective – write off excess or conversely, include the deficit to the
value - that brings the physically verified assets cost equal to that o f the
G/L asset account balances.
41
Steps of
Click
to edit
MasterApproach
title style
Costing
Ledger
• Create Cost Ledger Chart of Accounts Structure:
•
•
•
•
•
•
•
••
•
•
•
Name
Code
Apply balances
Click to edit Master text styles
Second level
Reconcile Cost ledger Trial Balance to Financial G/L
Trial
Balance
Third
level
Post to computerized cost ledger
Fourth level
Develop procedures for ongoing update of cost ledger
Initiate
Fifth level
changes to source document that facilitate
posting to cost ledger:
• cheque payment voucher - capital and operating
expenses
• Petty cash vouchers
42
Creating Cost Ledger
Structure
Click to edit
Master title style
Access Network
• Click to edit Master text styles
• Second level
• Third level
• Fourth level
• Fifth level
ACCESS NETWORK
Copper wire Access
Feeder
Ducted
Ariel
Distribution
Duct
ed
Wireless Access
Customer
Specific
Accessories
Base
Station
Customer
Specific
Terminal
Equip
Fibre to the Curb
Terminal
Equip
Fibre
Optic
Cable
Duct
ed
Arial
Cust
Prem'
equip
Ariel
43
Illustrative purposes only
Creating Cost Ledger
Structure
Click to edit
Master title style
Core Network
• Click to edit Master text styles
• Second level
• Third level
• Fourth level
• Fifth level
CORE NETWORK
CENTRAL OFFICE
EQUIPMENT
Switching
Signalling system
TRANSMISSION
Operator Systems
Fibre Optic Systems
Cabling
Terminal
Equip.
Radio Systems
Terminal
Equip.
Mux.
Equip
44
Illustrative purposes only
Creating Cost Ledger
Structure
Click to edit
Master title style
Fixed Asset Register Structure Codes
• Click to edit Master text styles
• Second level
• Third level
• Fourth level
• Fifth level
Level 1
Asset Group
Level
1
Code
Level 2
Asset
Category
Level 2
Code
Level 3
Tech.
Element
Level
3
Code
Level 4
Functionality/
Service Group
Level
4
Code
Asset Code
TRANSPORT
NETWORK
TRM
Transmission National
001
Fiber
Optics Sys
001
FOTS Cabling
001
TRM001001001
FOTS Terminal
Equipment
002
TRM001001002
Radio Terminal
Equipment
001
TRM001002001
Multiplexing
Equipment
002
TRM001002002
Radio
Systems
DATA
DAT
Switching
Transmission
001
002
002
ATM
Switching
001
DAT001001000
DPN 100
002
DAT001002000
Newbridge
001
DAT002002000
RAD
002
DAT002002000
45
For illustrative purposes only
Click to edit Master title style
•
•
•
•
•
Click to edit Master text styles
Second level
Third level
Fourth level
Fifth level
Define practical procedures
to create and maintain the
cost ledger
46
Cost Ledger Preparation Tool
Program
InputMaster
Screen title
Content
Click
to edit
style
Screen #1 - Enter Statutory General Ledger - Trial Balance of Accounts
•
•
•
•
•
Field Name
Field Type
Field Size
Characteristics
Click to edit Master text styles
Account Name
Alpha
Sixty five
Account
Number
Second
levelAlpha/numeric Twelve
Account Balance
Numeric
Fifteen
Positive / negative
Account
ThirdCategory
level Alpha/numeric Twenty five Balance sheet
classification, P&L
Classification
Fourth
level
Technology type
Numeric
Four
code
Fifth Category
level Alpha/numeric Twenty five Functionality
Network
Cost Category
Numeric
four
Service Type 1
Alpha/numeric Twelve
Service Type 2
Alpha/numeric Twelve
Group
Asset, expense,
direct, indirect
Shared Asset,
Direct Asset
Shared Asset,
Direct Asset
47
Cost Ledger Preparation Tool Program
Input
Screen
Content
Click
to edit
Master
title style
• Click
edit Master
text
styles grouping
Screen
# 2to
- Maintain
Asset
Technology
Reference
• SecondTable
level
• Third
level
Field Name
Description
of
• Fourth
level
technology type
• Fifth
Date level
Technology type
code
Field Type
Field Size
Comments
Alpha/numeric 200
characters
numeric
DD/mm/yyyy
numeric
Four
48
Monthly Maintenance of Cost
Ledger
- continuous
update
Click
to edit
Master title
style
Monthly
Financial G/L
• Click toreconciliation
edit Master textto
styles
For
the
posted
accounts
ensure
balances
in
cost
• Second level
ledger agrees with financial ledger for:
• Third level
• Fixed Assets (cost)
• Fourth level
• Tangible & Intangible Assets
Fifth level
•• Operating
expenses
49
Monthly Maintenance of Cost
Ledger
continuous
update
Click
to -edit
Master title
style
•
•
•
•
•
Click
to edit Master
textLedger
styles to agree in
Construction
of cost
total with
Second
level financial ledger, plug in
omitted
Third
level balances for categories not
represented in cost ledger
Fourth level
Fifth level
50
Monthly Maintenance of Cost
Ledger
- continuous
update
Click
to edit
Master title
style
Cost Ledger T/B
Procedure for update
•
Click
to
edit
Master
text
styles
•
Reversal of prior period
Net working capital
• Posting of current period
• Second level
Monthly Posting - Capex
Fixed
Assets
• Third level
• cheque payment vouchers
purchased for plant
• Accounts Payable
• Fourth level
Fixed
Assetslevel
• Fifth
Monthly reclassify financial
Capitalized O/H
G/L journal of O/H capitalized
Projects – Asset
Constructed
Reclassify manually into cost
ledger
51
Monthly Maintenance of Cost
Ledger
- continuous
update
Click
to edit
Master title
style
Cost Ledger T/B
Procedure for update
• Click to edit Master text styles
• Monthly cheque payment
Tangible
and
• Second level
• Accounts Payable
Intangible Assets
• Third level
Create Costing FAR &
•Depreciation
Fourth level
Update based on
and
Costing Classifications
Amortization
• Fifth level
Monthly Posting - Opex
Operating
Expenses
• cheque payment vouchers
• Petty cash Vouchers
• Accounts Payable
52
Monthly Maintenance of Cost
Ledger
- continuous
update
Click
to edit
Master title
style
• Click to edit Master text styles
• Long Term Liability
• Second level
•
Third
level
• Shareholder Equity
Not required for cost
• Fourth level
ledger
• Fifth Earnings
level
• Retained
• Revenues
53
Cost/Benefits of Continuous
cost ledger
ClickUpdates
to edit -Master
title style
• Balance kept in periodic agreement with financial G/L,
•attesting
Clicktotoitsedit
Master
text
styles
accuracy
level data input, for cost model allows
• •UpSecond
to date costing
of service cost at any point in time
•calculation
Third level
• Up to date service cost supports flexible pricing strategies
• Fourth
level
• This is
advantageous in competitive markets where
costlevel
based pricing is mandatory
• Fifth
• Favorable impression on regulators, competitors, and
stockholders knowing verifiable and up to date costs are
available on hand.
54
Establishing Cost Ledger
Click to edit Master title style
Costs
• Cost of hardware and software for maintaining
• Click to edit Master text styles
up to date cost ledger
•• Second
level
More posting required - additional staff cost
•• Third
level
Requires
realignment of source documents to
forlevel
cost ledger disaggregated format
• cater
Fourth
•• Introduction
Fifth level of new procedures to accommodate
posting of source data to cost ledger, on a
continuous basis
55
Example - Realignment of Source
Click todata
editdocuments
Master title style
Financial Cost
Description
Acct
Account
Code
Code
FA 1160
Payment to Nortel re switch
purchase
Amount
• Click to edit Master text styles
$1,000
• Second level
• Third
level
CA1160
CA 1162
• Fourth
level
CA1165
Totals
• Fifth level
Authorized By …………..
Cost
Allocation
$500
$250
$250
Checked By …………..
56
Developing New Procedures
Click to edit
Master title
style
Requisitioning
Department
Activities
• Click to edit Master text styles
Invoice sent to
Payment voucher
Costing dept advises
requesting
on charging of
• Second levelprepared & coded
dept - CAPEX
to relevant
payment to cost
ledger account
•or OPEX
Third level Financial Account
• Fourth level
• Fifth
level
Payment voucher
Payment
voucher coded
with cost
ledger account
& invoice
authorized for
payment
End
57
Developing New Procedures
Click
to edit Master
title
Costing
Department
Activities
style
• Click to editCheque
Master
text styles
payment
Cost ledger posted
voucher stamped
• Second level“posted” & relayed to
via cost ledger
costing dept for
“daybook” module
• Third level posting to cost ledger
• Fourth level
Reconcile
Cost ledger balances
•
Fifth
level
Monthly totals from
monthly totals
updated on cost
Payment voucher
posted via cheque
payment/
disbursement Module
with
disbursement
module
daybook posted to
cost ledger via
interface journal
ledger module via
interface & reports
generated
End
58
Process Summary - Assets
Financial
Accounting
G/L
Click to edit Master title style
•
•
•
•
•
Reconcile to G/L
•Disposals
•Omissions
•Write-off
•Add Ins
•Determine Asset Life
ClickAssets
to edit
Master text styles
- Physical
Verification
Second level
Field Study
•Fixed Assets
Third level
•Assets Numbering
•Asset Economic
Fourth
level
Life
Cost Ledger
FifthClassifications
level
Create Cost
Ledger – Asset
Accounts
•Costing Asset
Register data format
•Cost Ledger format
•Asset by technology
•Asset by components
•Asset by functionality
End
59
Process Summary - OPEX
Click to edit Master title
Financial style
Reconcile to
G/L in total
Accounting
G/L
• Click to edit Master text styles
Operating
Expenses by
• Second level Field Study
type
Perform study to
• Third level
allocate Financial
Cost Ledger
Ledger to cost
Classifications
• Fourth level ledger
• Fifth level Align to plant assets
Create Cost
Ledger - Expense
Accounts
by functionality and
commercial & admin
functions
Post to cost ledger
from source
documents
60
Click to edit Master title style
•
•
•
•
•
THE
END
Click to edit Master text styles
Second level
ThirdThank
level
you for your
Fourth level attention
Fifth level
More Questions ……..
61