Why your organization should be using open document standards

Microsoft has the enterprise market cornered with its Office productivity suite. Skill with Outlook, Excel and Word is pretty much required in the corporate world. As a result, most companies have significant data tied up in the proprietary binary file formats doc and xls.

This is not to mention all the web-based software designed for Internet Explorer (and usually an obsolete version of IE like 6) which is a similar issue to the vendor lock-in problem. Corporations still overwhelmingly use IE6 as their default browser, but the missed opportunities related to browsers in industry is a topic for another day.

In Office 2007 Microsoft has made its XML-based formats (docx, xlsx) the default, which was certified as an open standard by Ecma International in 2006, and then by ISO in late 2008. But did we really need a second open document standard? We already had OpenDocument, which was an ISO standard as far back as 2006.

OpenDocument is now supported in Office Word 2007 SP2, and there are only a few formatting issues noted by me in informal testing. There are issues around the formula handling in Excel, as Microsoft built support on the 1.1 version of the standard instead of the newer 1.2 and thus strips formulas from ODF spreadsheets even if they’ve been created using the Excel add-in. For the time being businesses might be safer using Office Open XML.

Despite this, ODF is the future. Rob Weir puts it succinctly:

With an open standard, like ODF, I own my document. I choose what application I use to author that document. But when I send that document to you, or post it on my web site, I do so knowing that you have the same right to choose as I had, and you may choose to use a different application and a different platform than I used. That is the power of ODF.

There is a plugin available from Sun for older versions of Word, including: Microsoft Office 2000, Office XP, Office 2003, Office 2007 (Service Pack 1 or higher) or the equivalent stand-alone version of Microsoft Office Word, Excel or PowerPoint.

Governments and educational institutions have been making the move to OpenDocument, and it’s time for the private sector to follow suit. Preserving the integrity of data within critical files should be a top priority. OpenOffice.org is a free and open source productivity suite that with its latest 3.0 release has reached a level of maturity appropriate for business use, and its implementation of the ODF standard is without the caveats associated with Microsoft’s.

The most important benefit is the freedom to choose how to view and edit your data within documents and spreadsheets. But the cost differential between OpenOffice.org and Microsoft Office should also be a factor. And the history of Microsoft’s unique interpretation of the term ‘interoperability’ should be considered if your business chooses to continue to use closed standards.

Will the netbook save the desktop?

There has been a migration in recent years from the desktop as primary computer to the laptop. As the cost of the laptop relative to its performance specs decreased, more and more people were finding that the benefits of mobility and a small form factor justified moving to a laptop.

Enter the netbook. These are basically laptops that have been shrunk down to half the size. The result has been increased mobility thanks to reduced weight and better power usage. The netbook is a recognition that users need primarily internet access to accomplish most daily tasks. But for most computer users, a netbook isn’t enough to do everything they need to do.

Re-enter the desktop. The limited mobility of a desktop would be complemented by the hyper mobility of a netbook and take the place where a single computer (a laptop) used to exist for some users. Take the netbook with you when you need to go, have the desktop waiting for you when you get back.

I think the possibility exists that we will have a segment of consumers that use the netbook+desktop setup. This could be the redemption of the desktop format, which has been in decline for the past few years at least. What do you think?

Programming and auditing

A recent post on Coding Horror on pseudocode reminded me of my work as an internal auditor. You might think it’s strange that a blog post on a programming/development technique would make me think of auditing – well, you’re right. It is a little weird. But hear me out.

Macbook Pro unboxingPseudocode is called that because it’s not really code. It looks similar to code but it’s written in plain English rather than something the computer can understand. The point of it is to develop the logic of a program first before getting into the nitty-gritty of actually creating something workable. You’ll be better able to see and fix high-level problems at this stage than you would be when you’re wading through a morass of source code.

This to me is a lot like documenting a transaction cycle from scratch. You start at a high level and just get the bare bones down on paper to understand it from that perspective. You have discussions with the staff involved at each stage and understand from their point of view the role they play. As you have these discussions you’re getting deeper into the step-by-step procedures involved. You’re fleshing out the documentation and starting to identify the key controls. 

Customer order received (on account)
If customer exists in system
	If customer is below credit limit
		Enter order
	Else
		Return to customer account manager
Else
	Send credit application to customer
	Receive complete application
	If customer credit history is good
		Set up customer in system
	Else
		Reject customer order

From there you delve a little more into the details. How are orders received? Who receives them? Who sets up the customer in the system? How is credit checked and by whom? Answering those questions will illuminate the controls and the segregation of duties within the process, and in a way you start to move from pseudocode to source code. You can’t test a transaction if it’s in pseudocode stage like you can’t run pseudocode in the development process. Once you have a testable, documented process it’s good to go.

So there you have it. There is a connection between the type of thinking required of a programmer and that of an auditor. This must be why I was able to make the transition from the Computer Science program into the Accounting program at university!

Dropbox makes USB drives obsolete

Well, maybe not obsolete, but definitely less integral for the mobile professional.

Dropbox ReferralsI started using Dropbox roughly six months ago and have been consistently impressed with the service, single tweet of discontent aside.

Dropbox syncs your files between computers on which you have their lightweight software installed. It creates a folder where you can store all the to-be-synced files, or you can specify at installation an alternative folder. Anything you “drop” into the “box” gets synced right away to the web interface and any other computers you have running the software and logged in. RIP, USB drive!

Dropbox is a great tool if you use multiple platforms regularly. It works across Windows, Mac and Linux. At home I have an Ubuntu laptop, at work I have a Windows laptop, and I have a persistent Kubuntu USB drive I occasionally use.

I’m still using their free 2GB service, but I frequently toy with the idea of upgrading to the next level: $10/month for 50GB. I would love for there to be some middle ground, say $5/month for 20GB. I could probably justify that expenditure to myself.

I highly recommend giving the service a try, for anyone who is using more than one device to store and work with their data. If you use Dropbox already, let me know why you like it in the comments.

Changes to GAAP for private companies in Canada

Since the mid 90s there has been debate within accounting circles on whether there should be two versions of GAAP – one for public companies and one for private companies. Big GAAP and little GAAP. The logic is that there are sections of GAAP that do not apply to non publicly accountable entities, and time and money is wasted complying for little benefit.

In 2002 differential reporting became available for private companies which allowed management, with the unanimous consent of shareholders, to choose how they accounted for certain financial statement items from among options. For example, subsidiaries and joint ventures can be accounted for using the equity or cost method, in addition to full consolidation.

IFRS presented the next challenge. Canada will adopt IFRS for public companies for years beginning on or after January 1, 2011. But what about private companies? The AcSB decided to tailor existing Canadian GAAP to the needs of private companies.

The following removed sections, for example, didn’t apply to private companies:

  • Earnings per share, as the measure is primarily used by public companies
  • Interim and segment reporting, for the same reason
  • Most EICs, which are mostly very detailed rules for special, specific situations

Differential reporting options were maintained for the most part, including:

  • Income taxes, which can be accounted for under the future income taxes or taxes payable method
  • Subsidiaries, joint ventures and investments, which can be accounted for under the equity or cost method

Note disclosure is being simplified. For example, property, plant and equipment, which previously required more detail in the notes, will no longer require it. The reasoning was that most third party users of private company financial statements look to key ratios calculated from the financial statement numbers to judge a company’s financial health rather than details on line items.

Financial instruments have been significantly simplified. All will be measured at historical cost, with two exceptions measured at fair market value:

  • Equity investments for which market price is readily available
  • Derivatives not qualifying for hedge accounting

IFRS adoption will be optional for private companies, and will make sense for those that plan to go public in the near future and possibly for those that compete against public companies to aid investors looking to compare their figures. Of course there are already private companies in Canada that are subsidiaries of European entities and have been reporting under IFRS for years now. (I work for one.)

All these changes should lower compliance costs for private companies, which should include lower audit fees. An article on private company GAAP in the current CA Magazine mentions lower costs three separate times. These will be realized primarily thanks to easier to audit information (cost vs. fair value) and lower disclosure requirements.

I hope all the accounting firms are getting ready to lower their prices now that the audit costs will be reduced.