We are doing a modernization of our Chart of Accounts, and I need some peer feedback on how to think, what to not forget, mandatory vs nice to have We are a MNC with 100-120 entities where 90% are all using the same accounting system. But as of now the COA we are using is too flexible (with local versions of the COA in many places) creating issues with granularity on regional and group level.  We would like to achieve: - Better granularity on local, regional and group level - Local, regional and group requirements and needs - Some flexibility if required, but in general "one" COA How would you tackle this situation?

Guiding Principles:
Consistency: One global COA structure with limited local flexibility.
Scalability: Ability to accommodate future growth or changes in the business.
Simplicity: Avoid over-complexity to ensure usability.
Compliance: Meet local statutory and tax requirements.
Granularity: Balance detail with practicality (avoid too many account codes).

Mandatory:

Global Accounts: Core accounts required for group-level reporting (e.g., revenue, cost of sales, fixed assets).
Compliance Accounts: Accounts needed to meet local statutory and tax requirements.
Consolidation Accounts: Accounts required for intercompany transactions and eliminations.
Segmentation: Use segments (e.g., entity, department, product line) to capture granularity without creating too many accounts.

Nice-to-Have:
Local Operational Accounts: Accounts specific to local operations that don’t impact group reporting.
Analytical Accounts: Detailed accounts for local management reporting (can often be handled through sub-accounts or dimensions).

Common Pitfalls to Avoid
• Over-Complexity: Avoid creating too many accounts or segments, which can make the COA difficult to use.
• Lack of Buy-In: Ensure local teams understand the benefits of the new COA to gain their support.
• Insufficient Training: Provide adequate training to ensure proper usage of the new COA.
• Ignoring Local Needs: Balance global standardization with local operational requirements.

Key Considerations
• Local Regulations: Ensure the COA accommodates local statutory and tax requirements.
• Intercompany Transactions: Standardize accounts for intercompany transactions to simplify eliminations.
• Reporting Needs: Align the COA with the reporting requirements of stakeholders (e.g., management, auditors, regulators).
• Future-Proofing: Design the COA to accommodate future business changes (e.g., new products, acquisitions

**Initial considerations**

-- Perform a COA audit:

   • Review all existing COAs across entities to understand variations, redundancies, and compliance requirements.

   • Identify the underused “local” accounts that and accounts that don’t need to be reported out separately for compliance.

• Consider having your entity finance teams justify all “local” accounts.

-- Evaluate existing flexibility:

   • Understand how flexibility has benefited and where it has created problems. For example, are there local statutory requirements driving some variations, or is it due to a lack of governance?

-- Define your COA segments:

   • Can any of your “local” accounts be reported on using other segments sch as cost center?

   • How many segments do you need in your account string? Consider adding one or two future segments to allow for future reporting opportunities.

   • How many digits should each segment be? Does your cost center need additional digits to allow for growth in the next 10-15 years?

**Some "mandatory" considerations**

• Global master COA with a segment structure designed to be scalable
• Alignment with group-level reporting standards (e.g., IFRS, US GAAP)
• Statutory compliance for all entities
• Integration with current ERP/accounting system
• Clear mapping for consolidation and reporting

**Some pitfalls to avoid**

• Ignoring system limitations (including any downstream/upstream systems that integrate to your ERP system)
• Insufficient training: misuse of the COA often arises from a lack of understanding
• Not designing with enough scalability