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Posts Tagged ‘Project Management Institute’

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 Project Partners Blog Author: Donna Dignam | Principal Functional Consultant 
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In April 2015, FASB (Financial Accounting Standards Board) issued ASU (Accounting Standards Update) 2015-05 to assist entities to determine when a customer in a cloud computing arrangement “CCA” (i.e. hosting arrangement) included a software license.

If a CCA includes a license to internal use software, the software license is accounted for by the customer as an intangible asset.  Basically, the intangible asset is recognized for the software license, and the payments or said license made over time are recognized as a liability.  If no software license is included in the contract, the company should account for the arrangement as a service contract, and the fees associated with the hosting service of the arrangement are expensed as incurred.

The Update did not give any guidance regarding the implementation costs for activities performed in a cloud computing arrangement as a service contract.  Since the FASB guidance in this area was not explicit, the Board decided to issue an Update to specifically address the resulting diversity in practice.

Who Is Affected by ASU 2018-154?

These Amendments on the accounting for implementation, setup and other upfront costs (commonly referred to as implementation costs) apply to entities that are a customer in a hosting arrangement that is a service contract.  Oracle Cloud computing arrangements where a license is sold to the customer along with a hosting arrangement with Oracle Cloud would be one such customer.

Main Provisions of ASU 20184

The Update’s intent is to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal use software and hosting arrangements that include an internal-use software license.  The current accounting for the service element of a hosting arrangement is not affected.

It is up to the company to determine which implementation costs to capitalize as an asset related to the service contract and which to expense.  Costs to develop or obtain internal use software that could not be capitalized under Subtopic 350-40, such as training costs and certain data conversion cost, also cannot be capitalized for a hosting arrangement that is a service contract.  The company in a hosting arrangement that is a service contract determines which project stage an implementation activity relates to.  Project stages include preliminary project stage, application development stage or post implementation stage.  Costs incurred for the application development stage are capitalized, while those costs related to the preliminary project stage or the post implementation stage are expensed as the activities are performed.

In addition, the company is required to amortize the capitalized implementation costs over the terms of the hosting arrangement.  The term of the hosting arrangement includes the noncancellable period of the arrangement plus periods covered by:

  1. Option to Extend – customer must be reasonable expected to exercise this option
  2. Option to Terminate the Arrangement – where the customer is reasonably expected NOT to exercise this option
  3. Option to Extend or Not to Terminate – where the vendor has control of exercising the option.

Impairment guidance, as if the costs were long-lived assets, and abandonment are to be applied based upon the existing guidance in SubTopics 350-40 and 360-10, respectively.

Income Statement presentation by the entity should be the same line item as the fees associated with the hosting service of the arrangement.  Similarly, classification of payments for capitalized implementation costs in the Statement of Cash Flows are done in the same manner as payments made for fees associated with the hosting arrangement.  In the Statement of Financial Position, capitalized implementation costs are presented in the same line item that a prepayment for fees associated to the hosting arrangement would be presented.

How is This Different and Why is it an Improvement?

Currently, GAAP does not specifically address accounting for implementation costs associated with a HASC.  Therefore, the Update improves current GAAP as it clarifies accounting and aligns the accounting for implementation costs for hosting arrangements, regardless of whether a license is conveyed.

For consulting firms, the new standards present an improved selling point as costs that were previously required to be expensed can now be capitalized.  For capital intensive industries, where cloud applications are being considered and dismissed due to financial considerations around increased expenses (and resulting decreased profitability metrics) due to cloud implementation, the new standard allows a way to capitalize the costs associated to both the license and the implementation and development costs around getting that application stood up.

When Does This New Update Take Affect?

For public entities, the amendments are effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. For all other entities, annual reporting periods beginning after December 15, 2020, and interim periods within annual periods beginning after December 15, 2021 are required.  Early adoption is permitted at any time.

The amendments in this Update should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption.

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Author: Wendy Lamar | Managing Principal Consultant | Project Partners
Oracle E-Business Suite R12 Project Certified Implementation Specialist


By Kimberly McDonald Baker

A new white paper published by Oracle, Delivering Success in Public Infrastructure Projects, provides a compelling portrait of the quantifiable benefits delivered by Enterprise Project Portfolio Management, especially as pertaining to public infrastructure or civil engineering projects.

“Research from the Project Management Institute (PMI) suggests that performance in meeting project goals, timelines and budgets creates a financial impact of staggering proportions. Organisations with high performance in these three measures risk only US$20 million per US$1 billion spent, while their less successful peers jeopardise US$280 million for the same US$1 billion spent.”

Read the rest of this entry »

OPM3® (Organization Project Management Maturity Model) is a Project Management Institute® (PMI) standard much like the PMBOK® Guide that was started in 1998 by PMI.

The OPM3 standard consist of three major elements: Knowledge, Assessment & Improvement and they are described below.

Knowledge: The user becomes proficient in OPM3, the body of Best Practices, the ideas of organizational project management maturity, and methodology of OPM3.

Assessment: The organization compares itself to OPM3 Best Practices to determine its current location on a continuum of organizational project management maturity.

Improvement: Change Initiatives leading to increased maturity can use the results of the assessment as a basis for planning, and move forward to implement the plan while conserving precious organizational resources.

OPM3 Benefits

Advance strategic goals

OPM3 provides a way to advance an organization’s strategic goals through the application of project management principles and practices, bridging the gap between strategy and individual projects

Understand and implement Best Practices

OPM3 provides a comprehensive body of knowledge regarding what constitutes Best Practices within organizational project management Identify maturity

OPM3 assists an organization with the identification of what their current organizational project management maturity is and, thus, forms a basis for deciding whether or not to pursue improvements by Stage and Domain

Plan improvement activities

OPM3 assists organizations with prioritizing and planning activities should improvement decisions be made

In summary

OPM3 is a powerful tool that organizations can use to improve their organization project management maturity, and hence the execution of their projects and achieve strategic objectives of the organization.

A Project Management Office (PMO) is a group within an organization that defines and maintains standards for project management.  A PMO generally bases its project management principles, practices and processes on some kind of industry standard methodology such as PMBOK (Project Management Body of Knowledge) or PRINCE2 (Project in Controlled Environments).

 

Over time, a PMO generally will become the source for guidance, documentation, and metrics related to the practices involved in managing and implementing projects within the organization.

 

There was a study conducted that provided the flowing statistics:

• Organizations with PMOs complete twice as many projects than those without PMOs.

• High-performing organizations outsource 135 percent more than low performing organizations.

• 76 percent of recently surveyed companies reported that they had created a PMO, and the longer the PMO had been in operation, the more project success rates improved.

• Those with a PMO operating for more than four years reported a 65 percent success rate increase.

• The top two reasons for establishing a PMO are improving project success rates and implementation of standard practices.

• 65.8 percent of high performing organizations have enterprise PMOs.

• PMOs can deliver a return in three to six months by providing the visibility needed to cancel, postpone, or scale back unnecessary or less strategic projects.

• As PMOs mature, they are significantly better at meeting critical success factors, including having effective sponsorship, accountability, competent staff, quality leadership and demonstrated value.

• The top two issues for PMOs are forecasting the need for resources and resolving resource conflicts.

 

To have a successful PMO Office the following dimensions need to be evaluated and followed.

 

1.        Benefits:  collective visibility for estimating and tracking financial and strategic project benefits

2.       Selection:  the scalability, clarity and quality of project funding practices

3.       Issues, Risks and Dependencies:  issue escalation and resolution, aggregate risk management, and “air traffic control” over project inter-dependencies

4.       Change Control:  a practical level of business value protection and visibility

5.       Project Planning:  a repeatable, scalable framework for organizing project effort that uses common metrics and deliverables

6.       Financial Visibility:  a financial information framework that incorporates control and accountability without excessive data manipulation

7.       Communication and Reporting:  a procedural and  technical platform to collaborate on deliverables, coordinate schedules and resources, and effectively collect and use standardized project health metrics

8.       Training:  a set of training materials and standards to promote fundamental project management skills, enabled by automated workflows to simplify procedural gate-keeping

9.       Quality:  the criteria for deliverables quality, and the process for monitoring this quality

 

As your organization prepares to spend significant money on new tools to help you better manage projects, how prepared are you to achieve a return on this investment?   Bradford K. Clark confirms a 15% to 21% improvement in project execution and delivery costs in a 1997 study done at the University of Southern California by moving the project management maturity level up one level. William Ibbs, UC Berkley, confirms similar results in consulting and engineering firms.

Professional Services Automation empowers the Professional Services organization by providing a set of enhanced, automated and integrated capabilities to set-up, manage, control and report on client engagements.  The span of PSA includes the initial opportunity identification, through the proposal and planning processes, staffing and executing the work, collection of costs, recognition of revenue, invoicing the client, knowledge management and collaboration with both the internal team and the client representatives.  PSA provides a single end-to-end, scalable system to manage the professional services business. This allows for growth of the business, reduces response time during the sales cycle, allows the PMO to foster innovation and increases quality of projects, better management of consulting employees and subcontractor resources, and integrates intellectual capital management with the delivery of professional services.

There are four success measures for your PSA implementation: Revenue Production, Productivity Enhancement, Risk Reduction and Improved Cycle Times.  In all cases these should be valid measurement criteria to determine success and measure the ROI of your investment.  As you prepare to implement new tools for your organization, consider establishment of a baseline across your firm.  Assess where the organization is before you begin.  Leverage this knowledge to help focus change management and training efforts where the return will be greatest. Build a business case with specific targets and ROI measures.  Develop a plan to move your organization up the project management maturity level, implementing only functions and features needed for success. Plan training programs to increase the understanding and skills of your Project Management team, not just in the tools, but in application of the tools to better manage your projects.  Enable additional features and functions as your project management team matures.

Key Performance Indicators (KPI) can assist in assessing the present state of the business and to prescribe a course of action.  Real-time monitoring of KPI’s allows maximization of performance over the shortest time period.  Oracle Project Management provides hundreds of KPI measurements for utilization by your team.  Remember to be SMART in your use of these important tools:

Specific  Measurable  Achievable  Realistic  Timely

Plan on updating the maturity measurement of your organization on a regular basis to determine where you have been successful in your improvement and identify areas of opportunity for future improvement.