Financial Accounting Advisory Services

Transcription

1 Financial Accounting Advisory Services Consolidation tool for an effective consolidation process September 2014

2 Agenda Consolidation and financial reporting 3 Common challenges 5 Our approach and methodologies 9 Key outputs 19 About EY 21 Page 2

3 Consolidation and financial reporting This solution has been designed to assist companies to meet their ever-increasing reporting demands. Consolidation can make the reporting process more complicated and can introduce stringent time lines for many organizations. Because financial processes are interlinked with business processes throughout the organization, streamlining reporting and consolidation helps to realize significant benefits in validating data and providing a better audit trail. Page 3

4 Consolidation and financial reporting (continued) With the help of our consolidation assistance team, we can help you to: Improve the quality of the reporting packages sent by local entities Optimize the processes and links between financial requirements and reporting for management purposes Ensure compliance for regional or subgroup-level consolidations Page 4

5 Common challenges Page 5

6 Finding the right solution for you Spreadsheets are of limited use when undertaking a consolidation exercise. Their drawbacks include: Poor audit trail Inconsistency of data Insufficient data protection Significant error and control risks Insufficient follow-up of controls and complex formulas Low level of automation Manual validation and control of package data No ledgers and predefined statements Page 6

7 Finding the right solution for you (continued) Dedicated consolidation software also brings some significant challenges: It could incur high implementation, license, maintenance and infrastructure costs. It can be oversized compared with the organization s needs. Distribution zones are limited to some countries or areas. Users require training. It can easily become obsolete as technology advances. EY can help develop a controlled consolidation process that means organizations do not have to invest in a consolidation tool or use spreadsheets requiring manual intervention. Page 7

8 Resulting challenges Competitive marketplace CFOs come under pressure to report accurately and quickly to management and stakeholders. Investors demand more frequent, more rapid and more detailed results from the consolidation process. CFOs are expected to take on the role of business partners and actively support senior management s decision-making. Reporting needs Global organizations need information broken down to regional or branch levels for management purposes, or to comply with local regulations. Data should be reported regularly to the management to be consolidated and compared with budgets and forecasts. Management challenges Faced with increasing demands and limited resources, CFOs constantly look for ways to increase their finance department s efficiency and effectiveness. Integration of new entities, follow-up of purchase price accounting or disposals of entities can put the process at risk if not managed on time. Page 8

9 Our approach and methodologies Page 9

10 Our approach Consolidation process 1 2 Streamline and map the chart of accounts Our approach Design the standardized and customized reporting pack Process data in application Generate customized output 3 4 Page 10

11 Our methodology Designing of input template Coding Mapping Testing Data validation Trial run Design the following standardized input templates to collect information from group entities in standardized manner: Local GAAP and IFRS and US GAAP (balance sheet) compliant template Local GAAP and IFRS and US GAAP (income statements) compliant template Intercompany elimination template Related party template Fixed assets schedule Others (customized as per clients needs), if any Ensure input template takes care of financial statements presentation requirements, including schedules Assign unique codes to each line item of the financial statement in the trial balance and in the standardized template. (This would not be necessary if the group has streamlined chart of accounts with unique GL codes.) Map the input templates with the company s trial balance based on unique codes. Test consolidation exercise. Incorporate a data validation check that will throw errors at the data input stage itself and significantly improve the quality of data inflow from subsidiary companies. Perform a consolidation exercise for any particular prior year to verify results are accurate. Page 11

12 Sample structure Subsidiary company s input templates Databases Output reports A Ltd. input template B Ltd. input template C Ltd. input template D Ltd. input template E Ltd. input template F Ltd. input template G Ltd. input template Financial statements database Intercompany database Fixed assets database Related party template Consolidated financial statements Subsidiary financial statements Intercompany matrix Fixed assets schedule Related party schedule Page 12

13 Example automated trial balance (downloaded from client s system) CoCd G/L acct Short text Currency Current year Previous year Acc Dep-Bldng INR - - TB may not be in GAAP reporting required format Pro.Dep-Temp.Bldng INR Acc Dep - P & M INR Acc Dep-HEM Eq INR Acc Dep-F&F INR Acc Dep-Office Eq INR Acc Dep-Veh INR Acc Dep-Veh Trucks INR Acc Dep-Comp/DPE INR Acc Dep-Software INR Acc Dep- Site/Fld Eq INR - - Page 13

14 Example designing the standardized input template (in compliance with GAAP reporting requirements i.e., Indian GAAP) Company name Reporting period Func currency APEX code Particulars Head Description CY PY Check - CY Check - PY SPM 31 Dec 13 USD 3A1000 Revenue from ops services services to holding, subsidiaries and related companies - - SPM 31 Dec 13 USD 3A1100 SPM 31 Dec 13 USD 3A1200 SPM 31 Dec 13 USD 3A1300 Revenue from ops Revenue from ops Revenue from ops services services services Construction contracts - - Trading - - Power generation - - To pull data here from TB SPM 31 Dec 13 USD 3A1400 SPM 31 Dec 13 USD 3A2000 Revenue from ops Revenue from ops services services Civil works - - services to others - - Locked cells SPM 31 Dec 13 USD 3A2100 Revenue from ops services Construction contracts - - SPM 31 Dec 13 USD 3A2200 Revenue from ops services Trading - - SPM 31 Dec 13 USD 3A2300 Revenue from ops services Power generation - - SPM 31 Dec 13 USD 3A2400 Revenue from ops services Civil works - - SPM 31 Dec 13 USD 3A3000 SPM 31 Dec 13 USD 3A3100 Revenue from ops Revenue from ops services Other operating revenue Total s,ale of products and services To holding, subsidiaries and related companies Locked cells Page 14

15 Example ABC Ltd Page 15

16 Example customized output different reports Page 16

17 Example output Indian GAAP financial Page 17

18 Example output fixed asset report Page 18

19 Key outputs Page 19

20 Key outputs Increasing control over consolidation More efficient finance function Each unit sends existing format financials in the local currency to corporate team or saves in a central location. Transmission of the information in a standardized format from each subsidiary to corporate improves the quality of the reporting. Each submitted financial statement is automatically validated for completeness. The time spent checking input templates and working file links is reduced. Users are provided custom templates and validations to enable better performance of accounting tasks. Major calculations are automated, e.g., minority interest, goodwill and cumulative translation adjustments. No manual intervention is required. Reports can be automated to be produced directly from the consolidation, avoiding the use of large spreadsheets and the risk of linking errors. Enhancing rigor and flexibility of reporting Equipping finance with an analytics platform Structured input forms and standard calculations can deliver uniform processes and norms. The approach provides one version of truth to the business. Custom validations on data input ensure that the quality of data and supplementary analysis is assessed and ensured proactively. Changes in the group structure can be accommodated smoothly and a historical snapshot can be taken. It provides formatted financial statements that can be refreshed each reporting period by users. Users can drill down to the source financial statement supported in the tool itself. Text comments can be added to the data within the tool. Page 20

21 About EY Page 21

22 Your regional EY network Africa Angola, Botswana, Cameroon, Chad, Congo, Democratic Republic of Congo, Equatorial Guinea, Ethiopia, Gabon, Ghana, Guinea, Ivory Coast, Kenya, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Nigeria, Rwanda, Senegal, Seychelles, South Africa, South Sudan, Tanzania, Uganda, Zambia, Zimbabwe Belgium and Netherlands Germany, Switzerland and Austria Commonwealth of Independent States Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Russia, Ukraine, Uzbekistan Central and Southeast Europe Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Cyprus, Czech Republic, Estonia, Greece, Hungary, Kosovo, Latvia, Lithuania, FYR of Macedonia, Malta, Moldova, Montenegro, Poland, Romania, Serbia, Slovakia, Slovenia, Turkey France, Maghreb and Luxembourg Algeria, France, Luxembourg, Monaco, Morocco, Tunisia Financial Services Organizations Belgium, Channel Islands, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Switzerland, the UK India Bangladesh, India Mediterranean Italy, Portugal, Spain Middle East and North Africa Afghanistan, Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Oman, Pakistan, Palestinian Authority, Qatar, Saudi Arabia, Syria, Tunisia, United Arab Emirates Nordics Denmark, Finland, Norway, Iceland, Sweden United Kingdom and Ireland The UK, the Isle of Man, the Republic of Ireland EY Global Countries worldwide 150 Employees worldwide 175,000 US$ revenue ( ) 25.8b Page 22

23 Financial Accounting Advisory Services contacts Pankaj Chadha Partner Laure Deshayes Executive DIrector Page 23

24 EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com EYGM Limited. All Rights Reserved. EYG no. AU2685 EMEIA Marketing Agency ED None In line with EY s commitment to minimize its impact on the environment, this document has been printed on paper with a high recycled content. This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice. ey.com