Group reporting is a specifically challenging process in today’s global business environment but should be on a shortlist of high priority tasks. In the ever-changing global business environment, investors, shareholders, and regulators demand reliable, accurate and complete information.
It’s important to have uniform and comparable financial information when working between the local subsidiary and parent company. Instructions for how to report the year-end financial information typically comes from group management, which will also include the reporting package, or the financial information format so the data can be incorporated into the group financial statements.
Instructions will typically include:
- Accounting polices to be applied
- Statutory and other disclosure requirements applicable to the group financial statements
- Reporting timetable
Different Accounting Principles
It is common for individual components of a consolidated group to not report financial information under the same accounting principle due to the need to comply with government or other third-party (such as a financial lender) reporting requirements. Third parties may be more comfortable when an entity reports under the local set of accounting principles, such as U.S. GAAP, IFRS, German GAAP, etc., and therefore, requires financial statements and financial information be presented under prevailing local accounting principles. Because the components may report under the group accounting principle only at year-end, they are often less familiar with the complex details of the group accounting principle. However, component management can take measures to ensure all entities are prepared for year-end reporting.
Review the group accounting manual
- Ensure accounting personnel are aware of group accounting policies and changes made throughout the year.
- Assess if accounting personnel require additional training or information to implement the new requirements.
Review new accounting pronouncements
New pronouncements are constantly issued by the standard setting boards, such as the IASB or FASB. Ensure accounting personnel are familiar with changes in accounting principles to prevent reporting inaccuracies.
One of the difficult realities for component management and component auditors is group reporting time constraints. Reporting deadlines are often only a few weeks after a period end and can be difficult to achieve when there is a lack of sufficient audit preparation. Opportunities to achieve the reporting deadline can be realized in the following areas:
Audit preparation should be treated as a year-long process. Too often, audit preparation isn’t started until after the year-end closing process is complete. Companies should devote time prior to the year-end closing process to reduce the time it takes to prepare schedules and reconciliations.
- Communicate significant changes in internal controls, accounting estimates and accounting policies.
- Discuss new or unusual transactions with the auditor throughout the year, including new business lines, discontinued business activities and other significant or unusual changes.
- Maintain an open line of communication with your auditors during the year rather than waiting until fieldwork to minimize surprises during fieldwork.
- Ensure all key personnel is available during the audit.
- Avoid non-critical meetings for finance and accounting personnel heavily involved in the audit.
Update closing procedures, internal controls and other relevant procedures and processes based on prior year audit adjustments, internal control deficiencies and other difficulties encountered during prior audits to reduce redundant journal entries and required communications from auditors.
How We Can Help You
We offer a wide range of services to assist management in fulfilling their group reporting requirements. We have worked with many foreign-owned companies to provide customized reporting, complete extensive group reporting packages, perform special procedures to provide assurance in specific areas and assist in the conversion of financial statements between local accounting principles and accounting principles required in other countries. We can help prepare the proper reporting documents for your foreign parent or group auditor, and provide specialized reporting by individual subsidiary. We can serve as your completely objective technical resource and help you comply with the ever-increasing volume of complex accounting and reporting requirements. Our technical accounting resources support you and allow your accounting staff to focus on their daily responsibilities.