Automated External Reporting
Promoting efficiency through change
Over the past 10 to 20 years, many companies have made significant investments to improve their accounting and reporting processes. Much of this effort has been focused on using technology to better enable processes to “close” the general ledger and “consolidate” balance sheets and income statements. These improvements have allowed companies to realize many benefits, including more reliable and readily available financial information, as well as improved control environments as processes are more automated and operationally efficient. However, as processes to close and consolidate have improved, many of the processes followed to prepare and submit financial statements and other external reports (e.g., statutory, tax, regulatory, management) continue to be operationally inefficient and — in some cases — may be ineffective.
Our experience has shown there is a common group of accounting and disclosure requirements that cause external reporting challenges across many industries. These include the following:
- Mergers, acquisitions and divestitures
- Consolidations and joint ventures
- Derivatives and hedging
- Fair value measurements
- Pension and other post-retirement benefits
- Income tax accounting and provisions
- Statement of cash flows
- Statutory and multi-Generally Accepted Accounting Principles (GAAP) reporting
- Segment reporting and disclosure of operational metrics
These challenges are pervasive due to the relative complexity in meeting the accounting and reporting requirements and difficulty in implementing standardized processes and technology to support such requirements.
A comprehensive approach to addressing the external reporting challenge
Automated External Reporting (AER) is a Deloitte approach that is focused on helping companies move past these challenges and significantly reduce their reliance on manual, spreadsheet-driven processes inherent in current external reporting activities by leveraging existing data and technology, by providing efficient, sustainable and technology-enabled processes to enhance external reporting and overcome operational inefficiencies.
Some tangible financial benefits may include:
- Reduction in man-hours and cost required to perform current processes
- Technology savings as existing technology may be leveraged
- Scalable framework to address other reporting requirements
- Reduced risk with enhanced internal controls over the external reporting process
- Opportunities to employ finance analytics (i.e., what-if analysis)
When determining whether AER may be right for your organization, consider the following questions and answers:
|Some key questions||Common answers indicating AER may be a value-added approach|
|How do you feel about the efficiency of your external reporting process?||
Our people have no time to analyze the results because we are so focused on preparing spreadsheets and using manual databases to support the compilation of financial statements and other external reports.
Upon completing the consolidation, the data required to compile the financial statements and notes are still in disparate systems and compiled in spreadsheets for reporting purposes.
|How many days does it take you to close the general ledger and how many days does it take you to produce and submit financial statements?||While it takes up to 10 days to close the general ledger and produce a balance sheet and income statement, it takes us another 25-35 days to compile, finalize and submit financial statements.|
|For a new acquisition, how would you consolidate and report the new businesses?||Our people will have to work more hours (or we may even need to hire more people) and employ more spreadsheets/databases to prepare and compile consolidated financials and notes for the new company.|
|How are top-side adjustments processed?||If we decide to not reopen the general ledger, the external reporting manager would determine all amounts affected in the financial statements and notes based on professional judgment and manually record adjustment(s) directly to the file containing the financial statements.|
|What governance and oversight is employed when preparing foreign statutory reports?||We rely on our local accounting manager to prepare statutory financial statements — including any adjustments from core GAAP to local GAAP. The accounting manager's primary tools for determining adjustments and compiling reports are spreadsheets and word processing applications.|
If the answers for your organization are consistent with the answers provided above, AER may be a value-added approach to automating your organization’s external reporting.
As used in this document, “Deloitte” means Deloitte & Touche LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.