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Financial Accounting Advisory Services Consolidation tool for an effective consolidation process

September 2014

EY FAAS consolidation tool

Agenda

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


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.


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


Common challenges


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


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.


Resulting challenges

► 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.

Competitive marketplace

► 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.

Reporting needs

► 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.

Management challenges


Our approach and methodologies


Our approach

Our approach

Streamline and map the chart of accounts

3 4

1 2

Design the standardized and customized reporting pack

Process data in application

Generate customized output

Consolidation process


Our methodology

Designing of input template

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

Coding 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.)

Mapping Map the input templates with the company’s trial balance based on unique codes.

Testing Test consolidation exercise.

Data validation

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.

Trial run Perform a consolidation exercise for any particular prior year to verify results are accurate.


Sample structure

Subsidiary company’s input templates

Consolidated financial statements

A Ltd. input template

Output reports

Subsidiary financial statements

Intercompany matrix

Databases

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

Fixed assets schedule

Related party schedule


Example – automated trial balance (downloaded from client’s system)

CoCd G/L acct Short text Currency Current year Previous year

1000 20121000 Acc Dep-Bldng INR - -

1000 20121001 Pro.Dep-Temp.Bldng INR - -

1000 20122000 Acc Dep - P & M INR - -

1000 20122001 Acc Dep-HEM Eq INR - -

1000 20123000 Acc Dep-F&F INR - -

1000 20124000 Acc Dep-Office Eq INR - -

1000 20125000 Acc Dep-Veh INR - -

1000 20125001 Acc Dep-Veh Trucks INR - -

1000 20126000 Acc Dep-Comp/DPE INR - -

1000 20126001 Acc Dep-Software INR - -

1000 20127000 Acc Dep- Site/Fld Eq INR - -

TB may not be in GAAP reporting required format


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

Sale of products and services

Sale of products and services to holding, subsidiaries and related companies

- -


Sale of products and services Construction contracts - -


Sale of products and services Trading - -


Sale of products and services Power generation - -


Sale of products and services Civil works - -



Sale of products and services to others - -


Sale of products and services Construction contracts - -


Sale of products and services Trading - -


Sale of products and services Power generation - -


Sale of products and services Civil works - -



Total s,ale of products and services - -

SPM 31 Dec 13 USD 3A3100 Revenue from ops Other operating revenue To holding, subsidiaries and

related companies - -

Locked cells

Locked cells

To pull data here from TB


Example

ABC Ltd


Example – customized output – different reports


Example – output – Indian GAAP financial


Example – output – fixed asset report


Key outputs


Key outputs

Enhancing rigor and flexibility of reporting

► Structured input forms and standard calculations can deliver uniform processes and norms.

► 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.

Equipping finance with an analytics platform

► The approach provides “one version of truth” to the business.

► 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.

► 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.

► Major calculations are automated, e.g., minority interest, goodwill and cumulative translation adjustments.

► No manual intervention is required.

Increasing control over consolidation

► 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.

► Reports can be automated to be produced directly from the consolidation, avoiding the use of large spreadsheets and the risk of linking errors.

More efficient finance function


About EY


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 (2012–13) 25.8b


Financial Accounting Advisory Services contacts

Pankaj Chadha Partner [email protected] + 91 124 464 4150

Laure Deshayes Executive DIrector [email protected] + 33 1 46 93 58 55

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. © 2014 EYGM Limited. All Rights Reserved. EYG no. AU2685

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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

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