Sysmod's PraxIS
Managing reality in Information Systems - Strategies for Success
Systems Modelling Ltd. Issue: Dec 2000
IN THIS ISSUE
Welcome
Euro features
Seeing double
Report on 8th FEE Conference: Paris 13 - 14 November 2000.
A free service for your website visitors
Legal sources
E-Business
Software Quality links
On the lighter side
21 Web links in this newsletter
About this newsletter, Feedback, and Archives
Disclaimer
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WELCOME
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Patrick O'Beirne, Editor
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Euro Features
Seeing double
As we get closer to the wire for euro changeover, the topic of dual display and dual pricing is coming to the fore. I remember back in 1997 seeing an internal document authored by a consultant working in the European Commission that analysed the issues carefully. The author applied Gallic Cartesian logic to untangle the loose language that uses the terms "dual display" and "dual pricing" interchangeably. The first refers to showing one price in two currencies, the second to showing two prices. Because of the effect of rounding errors in conversion, in practice many attempts at the former will end up in effect at the latter. Legally and practically, you can't put two different prices on the same item. The author also pointed out that "Dual pricing, even obligatory, systematic, and detailed, cannot guarantee against increased prices, without changing national price control legislation. 14 of the 15 member states have free markets, and in practice there are daily price changes, up and down, in shops reacting to competition or changes in cost price."
Greece
The November issue of Euro-Impact magazine [1] has an article on Greece’s changeover legislation. (By the way, I recommend Euro-Impact magazine for the euro project manager in large companies, particularly if they need to get up to speed quickly on developments across the eurozone. That issue also covered cash changeover problems and "black money" worries. )
The Greek Parliament passed legislation in late September making dual price display compulsory for businesses with 11 employees or more from Jan 1 2001, when Greece adopts the euro, and for smaller businesses from March 1. Businesses in Greece are lobbying to obtain exemptions. The rules were amplified in a regulation dated October 31 that requires line item dual display in the B2B transactions of companies working in a euro environment. They specify that business-to-business (B2B) invoices of companies using the euro must provide line item equivalents in drachma. Business-to-consumer (B2C) invoices only have to convert the total and even there only if invoices are machine-generated. Euro-Impact report that "The requirement for line-item dual display in B2B transactions has caused consternation amongst companies planning to convert their base currency during 2001 because of the cost of providing this for such a short period of time. The official justification from the Economic Development Ministry, whose idea it was, is that it would be too much of an imposition to expect Greek SME’s to convert euro invoices to drachma."
Too much of a good thing?
I sometimes think that such legislation is drawn up and passed by people who have never worked in an accounts office and have little understanding of the practical issues that such laws can bring up. I'm not concerned about any legal difficulties from rounding errors. The Greek legislation already says "Any discrepancies arising from application of the rules shall not be considered a debt. Nor are they to be considered an accounting inaccuracy." Even without that, parties could fall back on "de minimis non curat lex" - "the law is not concerned with trifles". My concern is with the practicalities of handling documents with dual pricing, and extra overtime to fix up problems is not a trifle. In fact, I have argued that in a commercial environment, such displays are misleading, unhelpful, and counter-productive.
Dual display is intended to educate people in a new scale of values. It has particular application in the business-to-consumer (B2C) area. However, the typical recipient of such documentation in a business (B2B) does not need education in that manner. In fact, the consequences of such displays are:
1) Those who only look at totals risk that a quick glance at an invoice will focus on the bottom right hand corner, read a euro amount as an IEP amount, and make an excessive payment. This has already been reported in the Loughrea Eurotown [2] project. One could argue that that is a defect in usability design and the solution is to move the figure to the left of the document where it is less confusing. But my next point is that a single figure serves no use at all in a business context.
2) Those who need the analysis figures for their bookkeeping are not helped by a single total figure expressed in euro. They would need at least the VAT, and probably all the analysis lines, expressed as euro, if they were using the euro in internal accounting. This will of course give rise to rounding errors if the currency of contract is IEP. Therefore, such users need to receive euro-only invoices and not IEP ones at all.
3) The only people currently requiring dual invoices are companies who can already handle the euro, and if that is the case they must still retain the ability to process in IEP. There is no reason to shift the burden to smaller companies when the bigger company is perfectly capable of continuing to process IEP.
4) It may be argued that the recipient needs to check that the prices charged are the same as those agreed or previously received in a price list. This is obviated by the understanding that if the invoice is in euro then all that one needs to check is whether the figures are the same as agreed in whatever denomination. I suggest that a transaction (from order to payment) should be completed in the currency in which it was initiated, and only new transactions should be in euro. The Irish Business and Employer's Confederation [3] (IBEC) believe that the denomination of the invoice that a company receives should be in line with what has been agreed with business partners. They feel that displaying the end totals in both currencies will raise the 'visibility' of the euro.
5) In the case where a large company is issuing invoices in euro to SME customers, of course they should give good notice. The SME is accustomed to the large company - even when they are a supplier - having a dominant position. The relatively few large companies who will change compared to the number of SMEs will have a positive effect in that after initial efforts to process such invoices using manual conversions, the SME will eventually accept the need to find a more efficient way of doing it. And it is in their own interest that they do it now rather than leave it to December 2001.
The National Code of Practice (NCOP) in Ireland
The NCOP [4] states "From 1 October 2001 until one month after Irish notes and coins have been withdrawn, prices of goods and services to the fullest extent practicable will be displayed in both currencies. Dual displays of prices will be unambiguous, easily identifiable and clearly legible."
However, it may be difficult to achieve an unambiguous display. Here's an example of what can go wrong. I saw a price displayed as EUR20.05 converted to IEP 1.61. That is a correct conversion. However, the consumer, starting from their base of national currency, would take the figure of 1.61 and convert it correctly to 20.04. You can imagine their reaction to what they would see as an attempt to slip in a price increase by rounding up. There could be appeals to the NCOP paragraph that states "All subscribers to this Code commit to carrying out the changeover to the euro fairly and will seek no advantage from the conversion." That kind of price ambiguity is a necessary consequence of what AMUE call the "price accordion": prices in euro become squeezed out when expressed in Irish Pounds. In the rest of the eurozone countries, it happens the other way around. Sensibly, the NCOP goes on to say: "Price displays should not be overloaded with figures. Dual display on individual products may be limited to the final price payable by the consumer (inclusive of e.g. VAT) and dual display on till receipts or bills may be limited to the total amount." This makes more sense for consumer transactions.
The Association of British Industry [5] (ABI) have an Industry Position Paper on "EMU And Dual Display Of Monetary Amounts":. The paper focuses on dual display for retail customers only, as they are perceived to be the most 'vulnerable' group. The industry would not expect there to be regulations or collective agreements covering commercial contracts. The industry recommends the following methods for inclusion on a 'menu' of options; even there, only key figures are shown in both currencies.
- · Provision of a conversion chart or calculator;
- · Full dual display;
- · Selective dual display;
- · Selective dual display on a separate sheet;
- · Provision of two sets of documentation.
If you think that any of the above is controversial; or that an important point has been missed .. give us some feedback!
Euro Quiz Questions
Q1: In what country can you find Maastricht?
Q2: What is the subject of the Maastricht Treaty?
Q3: What conversion rules are specified by Article 235 of the Maastricht Treaty?
The answers are at Euro Quiz Answers below.
Last month, I asked "How many designs of euro coins are there?" and gave 12 national sides in the answer. In fact, for historical reasons there are little statelets and principalities in Europe that have the right to issue their own coins. It's unlikely that coins from Vatican City, Monaco, and San Marino will be much in evidence, but they may be in demand by numismatists.
(By the way, here's a hint: Q3 above is a trick question.)
8th FEE Conference: Paris 13 - 14 November 2000
My report on the conference [6] highlights that the most significant theme to emerge was how so many euro project managers are struggling with the management of the project.
My presentation on "Thinking through the software facilities you really need for the changeover" can be read online at the Systems Modelling website [7] or downloaded as a Zipped Powerpoint presentation from the FEE Euro web site presentations page. [8]
A free service for your website visitors
If your organisation has a web site on the euro, you can provide your web site visitors with answers to frequently asked questions on EMU and the euro currency, by a link to our comprehensive FAQ.[9] This list of Frequently Asked Questions and their answers is rated by Yahoo.com EMU page [10] as the no.2 "Related Web Site" after the European Commission [11] itself.
Euro Quiz Answers
Q1: Netherlands - in the south near the borders with Belgium, Luxembourg and Germany. Rory Kearns, one of the regular posters to the Euro2002 mail list [12], comments that it is "The only place I've ever come across that has parking meters that take four currencies."
Q2: The Treaty on European Union signed in Maastricht in 1992, in particular dealing with Economic and Monetary Union (EMU) and the convergnce criteria.
Q3: None. The conversion rules are laid down by Council regulation 1103/97 which is sometimes referred to as the "Article 235 regulation" because it begins "Having regard to the Treaty establishing the European Community, and in particular Article 235 thereof". However, if you look in the text of the Maastricht Treaty [13], you will not find an Article 235. They renumbered it to Article 308. (See Euro-paper no. 7 "Compilation of community legislation") This article is simply a catch-all provision for regulations that apply to all member states. It was used here to achieve legal clarity that the regulations apply to all EU member states, not just those participating in EMU. Here it is from the consolidated version of the treaty (PDF) [14] on the EU web server:
Article 308 (ex Article 235)
If action by the Community should prove necessary to attain, in the course of the operation of the common market, one of the objectives of the Community and this Treaty has not provided the necessary powers, the Council shall, acting unanimously on a proposal from the Commission and after consulting the European Parliament, take the appropriate measures.
Sources of Law information
This month, I'll share with you a couple of useful sources on legal issues, The first has a specifically IT focus, the second is general law in Ireland.
Mark Grossman leads the Computer & E-Commerce Law Group [15] of Becker & Poliakoff, P.A. I receive the email edition of his weekly TechLaw column. It has covered subjects such as the FBI's Carnivore, tech contracts, cyberstalking, ASPs, privacy, and computer crime.
The Irish Law Site [16] was recently set up by Darius Whelan of Tallaght Institute of Technology in Dublin. There are currently 411 members of the IrishLaw mail list. The web site contains information on the Constitution, Legal Systems and Courts, Governments, Academics & Practitioners, the Peace Process, European and Misc.Irish. If you'd like more IT-specific information, there is a book "Information Technology Law in Ireland" (Karen Murray / Denis Kelleher), but not on that web site.
E-Business
This month, a couple of web sites with guidance documents for SMEs:
Introduction to Gazelles and Gophers [17]
This paper seeks to define a set of best practices for SMEs setting up and developing E-commerce initiatives. The best practices are drawn from an analysis of a sample of 145 SME E-commerce ventures and in-depth interviews with 27 best practice SME initiatives. The paper argues for a new categorisation of SMEs and an understanding of their strategic objectives in order to determine applicable Critical Success Factors (CSFs). Recommendations for best practices are mapped against SME strategies and CSFs.
The eCommerce Innovation Centre [18] (eCIC) at Cardiff University is a Centre of Excellence in electronic commerce at local, national and international level, with particular focus on the use of electronic commerce (eCommerce) within small and medium sized enterprises (SMEs) and international trade and transport.
A series of case studies illustrating how Welsh SMEs are gaining benefits from the pragmatic use of eCommerce can be downloaded from this site.
Project Management Proverbs
The same work under the same conditions will be estimated differently by ten different estimators or by one estimator at ten different times.
A change freeze is like the abominable snowman: it is a myth and would anyway melt when heat is applied.
Software Quality
My pick of the month is the Software Program Managers Network [19]. The Mission of the SPMN is to enable managers of large-scale, software-intensive development or maintenance projects to more effectively manage and succeed by identifying and conveying to them management Best Practices, lessons-learned, and direct support. They offer a downloadable SPMN Software Evaluation Model Guidebook
The lighter side
I-Resign.com [20]: Learn how to hand in your notice in style. Read some of the funniest, most foolish and frightening farewell notes ever to have landed in the boss's in-tray I particularly enjoyed "The I-Resign.com Guide to Office Jargon".
For the true office cubicle worker, there is always Dilbert. [21]
WEB LINKS
[1] www.euro-impact.com
[2] www.eurotown-loughrea.ie
[3] www.ibec.ie
[4] www.emuaware.forfas.ie/business/codemenu.html
[5] www.abi.org.uk
[6] www.sysmod.com/feeparis.htm
[7] www.sysmod.com/feeparis/index.htm
[8] www.euro.fee.be/presentations.asp
[9] www.sysmod.com/eurofaq.htm
[10] http://fullcoverage.yahoo.com/Full_Coverage/World/european_monetary_union
[11] http://europa.eu.int/euro (note: no www.)
[12] maggie.tenagra.com/scripts/lyris.pl?site=euro2002&id=111445195
[13] europa.eu.int/en/record/mt/top.html
[14] europa.eu.int/eur-lex/en/treaties/dat/ec_cons_treaty_en.pdf
[15] www.EcomputerLaw.com
[16] www.irish-law.org/
[17] kite.tsa.de/
[18] www.ecommerce.ac.uk/
[19] www.spmn.com/products_guidebooks.html
[20] www.i-resign.com
[21] www.dilbert.com/comics/dilbert/archive/
Patrick O'Beirne
Copyright 2000 Systems Modelling Limited, http://www.sysmod.com . Reproduction allowed provided the report is copied in its entirety and with this copyright notice.
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