Glossary Topics A-E Flashcards
Above The Line?
Denotes revenue and expense items that enter fully and directly into the calculation of periodic net income, in contrast to below the line items that affect capital accounts directly and net income only indirectly. Additionally, charges from external vendors such as wireless and telephone charges are often above the line because money is being paid to external vendors, thereby affecting P&L.
Accounting - Accrual Basis?
Accrual basis taxpayers include items when they are earned and claim deductions when expenses are incurred. An accrual basis taxpayer looks to the “all-events test” and “earlier-of test” to determine when income is earned. Under the all-events test, an accrual basis taxpayer generally must include income “for the taxable year when all the events have occurred that fix the right to receive income and the amount of the income can be determined with reasonable accuracy.” Under the “earlier-of test”, an accrual basis taxpayer receives income when (1) the required performance occurs, (2) payment therefore is due, or (3) payment therefore is made, whichever happens earliest. Under the earlier of test outlined in Revenue Ruling 74-607, an accrual basis taxpayer may be treated as a cash basis taxpayer when payment is received before the required performance and before the payment is actually due. An accrual basis taxpayer generally can claim a deduction “in the taxable year in which all the events have occurred that establish the fact of the liability, the amount of the liability can be determined with reasonable accuracy, and economic performance has occurred with respect to the liability.” Similar definition of accrual basis accounting is true for financial accounting purposes, except that revenue can’t be recognized until it’s earned even if a cash payment has already been received by the tax authorities.
Accounting - Cash Basis?
In financial reporting the cash method of accounting is used when accounting records revenue when cash from customers is received, and records expenses when they are paid in cash.[5] In the tax environment cash basis tax payers include income when it is received, and claim deductions when expenses are paid. A cash basis taxpayer can look to the doctrine of constructive receipt and the doctrine of cash equivalence to help determine when income is received. Most individuals start as cash basis taxpayers. There are four types of taxpayers that cannot use the cash basis: (1) corporations with over $5,000,000 in gross receipts; (2) partnerships with at least one C corporation partner; (3) tax shelters; and (4) taxpayers Apptio Glossary 5 required to keep inventory (retail, wholesale, manufacturer etc…) Exceptions (1) Farming Businesses (2) Qualified PSC’s (3) Entities with gross receipts of not more than $7,000,000.
Activity Based Costing (ABC)?
A costing methodology that identifies activities in an organization and assigns the cost of each activity with resources to all products and services according to the actual consumption by the products and services. This model assigns more indirect costs into direct costs compared to conventional costing models.
Allocated Storage?
Usable storage that has been dedicated to a logical volume on a server.
Allocation?
A relationship between two objects in an Apptio model in which data is passed from one object to another. A rule that is established within a model to spread an established value (provided by drivers) from object to object . Allocations are configured between objects throughout the model to “connect” them and enable the flow of value (e.g. cost, unit counts, etc.) from one object to other objects.
Amortization CPA?
The allocation of the cost of intangible assets (e.g., software) to periods in which the assets are used. Matching principle! Accountants spread the cost over the useful life of the asset.
Amortization does NOT mean the decline in value of an asset! Amortization is an expense (OpEx) Tangible assets are “depreciated” (e.g. hardware depreciation). In-tangible assets are “amortized” (e.g. software amortization).
Annual Operating Plan (AOP)?
Annual Operating Plan (AOP) means the plan that serves to lay out planned activities and corresponding monetary resources for the fiscal year, measured on a quarterly basis, including, but not limited to, Revenue and EBITDA. The AOP may be revised in the discretion of the Company’s Board of Directors.
Application? (#1)
Application software, also known as an application or an app, is computer software designed to help the user to perform specific tasks. Examples include accounts payable software, accounting software, office suites, graphics software and media players. It is a type of Software and includes various aspects including custom-built applications, off-the-shelf applications and hosted Software as a Service (SaaS). A combination of applications by one provider is called a suite.
Generally, users do not interact with system software as it works in the background whereas users interact with application software while doing different activities. A computer may not require more than one type of system software while there may be a number of application software programs installed on the computer at the same time. System software can run independently of the application software while application software cannot run without the presence of the system software.
Application? (#2)
Application is identifiable software or tightly coupled software components providing functions required by a Service. An Application may be part of one or more Services, but can only be associated to one Application Family. An Application is ran or hosted on one or more Servers or Clients (including Cloud instances).
This definition is intentionally generic to permit recognizing desktop applications (e.g. Excel, Word), off-the-shelf applications (e.g. Salesforce, Box), and in-house developed applications. Desktop applications should be tracked, but limited to the Application (or major version of) itself…not the various deployments of it unless a business need dictates otherwise. Deployment tracking should be done elsewhere.
Application Family?
A collection or categorization of one or more Applications. It is a label generally used within an IT organization (not listed in the Service Taxonomy or “Bill of IT” provided to supported Technology clients). An Application can only be a member of a single family.
The use of Application Family enables more generic conversations about Applications when specificity is not needed. Application Families are not directly related to Services except by way of the relationship defined between an Application and a Service.
Application Portfolio?
A collection of all Application Families and, therefore, all Applications.
Application Portfolio Management?
A management framework for IT decision makers to work and govern the Applications contained in the portfolio.
ARC - Additional Resource Charge?
Pronounced “Arks”. Refers to an adjustment to a service contract based on an increase in the volume of services performed by the vendor. Apptio Glossary 7 An ARC is the additional charge (above the base charge) that is paid for each pricing unit that is used above the volume baseline. If usage is less than the volume baseline, then a “reduced resource credit RRC” is applied to reduce the base charge.
ARC/RRC Overview?
A traditional tactic used in outsourcing that uses a fixed fee for a fixed volume of services, with variations on fees for volumes above or below target thresholds.
Charges for additional resources (“ARC’s”) above the threshold are priced at rates to reflect the marginal cost of the additional production plus a reasonable profit. Credits (“RRC’s”) granted for reduction in resources consumed or provided offer the enterprise customer some comfort, but the savings on credits tend not to be equivalent to the increased costs when paying for incremental resources in excess of the threshold.
Pronounced “Arks”. Refers to an adjustment to a service contract based on an increase in the volume of services performed by the vendor. Apptio Glossary 7 An ARC is the additional charge (above the base charge) that is paid for each pricing unit that is used above the volume baseline. If usage is less than the volume baseline, then a “reduced resource credit RRC” is applied to reduce the base charge.
What does ARC stand for?
Additional Resource Charge.
What does ARC stand for?
Reduced Resource Credit.
ARC/RRC Pricing?
A traditional tactic used in outsourcing that uses a fixed fee for a fixed volume of services, with variations on fees for volumes above or below target thresholds.
Charges for additional resources (“ARC’s”) above the threshold are priced at rates to reflect the marginal cost of the additional production plus a reasonable profit. Credits (“RRC’s”) granted for reduction in resources consumed or provided offer the enterprise customer some comfort, but the savings on credits tend not to be equivalent to the increased costs when paying for incremental resources in excess of the threshold.
What does ATUM stand for?
Acronym: Apptio TBM Unified Model.
Available Storage?
Usable storage not dedicated to a logical volume on a server. Cannot be used until allocated.
Below the Line?
Below the line is defined as income or expense in accounting which have no noticeable effect on company profits in the current period. In Apptio terms, showback Bills of IT are working “Below the Line” because no money is actually changing hands between IT departments that collect costs for Services and the Business Units that consume services.
When we look at Cost Savings decisions that were driven by Apptio, it is important to consider if a cost save is an “Above the Line” save, which affects profitability or a “Below the Line” save which may have reduced consumption but not produced a net savings to the business because no service was retired and no money was really saved.
Benchmark?
A standard or point of reference against which things may be compared or assessed. It is a comparison only and NOT a statement of whether the variance is good or bad. Any variance is an indicator that further analysis needs to be performed.
For example an IT unit rate of $x/GB of storage is 10% more than a cited external benchmark. Being more than the benchmark does not mean that the higher IT storage cost is a bad thing. What cannot be compared is whether that increase in cost is, for example, because the Business requires redundancy and that ability gives the Business product or service a competitive advantage in the market. Further analysis would have to have been done to see that explanation.
Bill of IT (BOIT)?
A Bill of IT is a report that customers running Apptio software can generate to communicate the value of their services to business partners showing how much of each technology service they consumed and at what cost. This allows them to shape business demand by demonstrating how technology is consumed by business units and users and where it supports their business capabilities.
What does BOIT stand for?
Acronym: Bill Of IT.
Business Unit?
A logical element or segment of a company (such as accounting, production, marketing) representing a specific business function, and a definite place on the organizational chart, under the domain of a manager. Also called department, division, or a functional area.
Business User (BU)?
The lowest level role in the Apptio applications. Business users have the fewest permissions. They can switch between projects, see default shared reports, and edit tables on viewable reports.
Capitalization (or CapEx or Capital Expenditure CPA)?
A Capital Expenditure is money spent on the purchase (e.g., servers), creation (e.g., software development project), or improvement (e.g., data center expansion) of an asset. Asset related spending is reflected on the owner’s Balance Sheet, and is not an expense that is reflected on the owner’s P&L.
A capital expenditure gets capitalized, or booked as an asset, and flows through your income statement as depreciation over a period of time. Capex not only includes hardware and software, but also the costs to deploy them and certain application development costs (e.g. travel costs, labor to build hardware/software/applications, development testing). Capital expenditures guidance is provided by standard accounting practices (GAAP) and is specifically set for the corporation by corporate finance; they are not negotiable within IT.
These are items that provide long term functionality, greater than one year, for which accounting rules allow spreading of the cost (thru depreciation) over a set period of time that corresponds with the asset’s useful life. They occur during the onset or beginning of the new functionality (i.e. asset). For example a new server provides computing functionality that typically lasts about 2-3 years. However, corporate finance may choose to depreciate based on 2 years.
If they chose to do it based on 5 years, auditing could ask for documentation to substantiate that choice of a standard. Hopefully corporate finance would ask for feedback from IT as to the expected life of a server. You can refer clients to look at SOP 98-1 for specific details about what can be capitalized.
Calc (Project Calculation)?
Math being performed on the platform after changes are made to a project.
