pierre teillet vincent hecquet the eu essnet project on essnet on « profiling large and complex...

Pierre TEILLET

Vincent HECQUET

The EU ESSnet project on ESSnet on « profiling large and complex MNEs »

State of the art / Crucial questions

ESSnet & Insee (but personal views of the authors) Q2010 4-6 May 2010

ESSnet on « profiling large and complex MNEs »

› the context, approach, programme and actions slides 3 to 7

› the current state of operations slides 8 & 9

› about definitions of enterprises slides 10 to 13

› Proposals, questions and options slide 14 to 18

› examples slide 19

› next work slide 20



the context

The profiling necessity is:

› related to two EU 1993 regulations (Statistical Business registers; Statistical units)

› that did not allow “measuring the whole elephant” (Statistics Canada report to UNECE / CES 2005)

› and lead to a new BR regulation (2008), including as well MNEs as “enterprises” .

But we still have to “translate” the previous studies in operational processes.



the contextThe present project is:

› part of the MEETS programme(Modernisation of European Enterprise and Trade Statistics)

› designed to achieve a streamlined framework of business-related statistics

› as a part of the system of the EGR (Euro Groups Registers)

› in order to achieve coordinated and meaningful statistical unit structures for enterprise groups

› (with maximum use of existing knowledge (EU and non EU))


ESSnet on « profiling large and complex MNEs

the general approach

› objectives & results structured into 3 steps:

– 2009-2010: a positioning paper on feasibility of profiling; an input on statistical units for an eventual change of EU regulation

– 2010-2012: methodology, tools, guidelines …

– 2013 & on: full implementation of profiling inside EU

› throughout the project: testing, iterations and early results



the work programme

› ESSnet, a new way for developing European Statistics:– a partnership of NSIs– cooperating to develop a common methodology– willing to disseminate the results to the whole European

Statistical System– with the strong support of Eurostat

› The « profiling » partnership:– 7 NSIs : CBS –NL, DESTATIS –DE, ISTAT –IT, ONS –GB,

SF –FI, OFS –CH , INSEE –FR coordinator



the actions planned under the partnership

› WP A. To define the feasibility and the scope of ‘profiling’ large and complex MNEs.

› WP B. To develop a common conceptual framework, methodology, rules and standards for profiling

› WP C. To develop processes / workflows, tools,operational guidelines and quality control of profiling, organisational and financial models

› WP D. To test and implement 'profiling'

› WP E. To develop a model for sharing of 'profiles' (including legal framework)

› WP + To disseminate and train› WP M To manage the ESSnet

WP = working package; managed by a leading partner (LP), 1 to 3 working partners (WP), all others being reviewing partners (RP)



current state of operations (1)

› Framework partnership agreement: signed in October 2009› Specific Annual Agreement: signed in December 2009› Kick-off meeting, 3 all-partners coordination meetings› 2 Workshops :

– London 13-14 Jan on feasibility - the “why” and the “who”

with the stress on stakeholder views– Amsterdam 24-25 Feb on Statistical Units

› An organised cooperation between Workpackage leaders with Trilateral meetings

› A planned 3rd workshop on “options” in June



current state of operations (2)

› Consultation with stakeholders is still ongoing› When and if trade-off will be necessary, setting

priorities among their wishes could become unavoidable

› Current list of main stakeholders:– National AccountsBut do we serve first EU needs or National needs?– Balance of Payments and Foreign Direct Investments (FDI)– Foreign Activities and Trade Statistics (I & O-FATS)– Structural Business Statistics (SBS)



definition of « enterprise »: main issues

In the present EU regulation: Enterprise, defined as the smallest combination of

legal units- that is an organisational unit

- producing goods and services (for the market)- … with a certain degree of autonomy in decision making- especially for the allocation of its current resources

is used at national level, without international comparability:- the sum of the parts usually differs from the total

- the required level is not specified (national, European or global?)

- the standards for data collection are not consistent either conceptually or in practice

so that the ultimate question will be one of « global profiling » versus profiling relative to any kind of territory



definition of « enterprise »: main issues

Probably necessary to choose between:– present definition of enterprise (easy to use with legal administrative or

fiscal data, but not consistent with management structure)– a new one (at least partly) based on group operational segments

or divisions (GODs) (listed in Annual Reports according to IFRS8)

GODs definition usually crosses the national boundaries, and thus needs a choice between: – enterprises crossing national boundaries– GODs split into enterprises within national boundaries– with a classification dilemma (simplest example next slide)

GODs definition is not directly related to legal units:– (some) legal units may be split into more than one enterprise– need to find a way to relate the enterprise to the institutional unit

– need (eventually) to create “rest of world” units for outside EU

There is no role, in the EU, for the local unit.



definition of « enterprise »

The territorial classification dilemma:

What is

› global classification?› national classification?

› when France and Germany› distribute GB output

France (UCI& Distribution)

GB (Manufacturing)

Germany(Distribution)



definition of « enterprise »

The territorial classification dilemma:can be more complex if flows of manufactured goods are implied

What is› global classification?› national classification?

› when Spain and France are manufacturers of goods conceived in France and sold in the whole of Europe through a unique French “trade” company

› distributed in all EU countries through specialised affiliates

FR (UCI, R&D,Manuf and trade)

Spain(Manufacturing

and distribution)

All EU countries(Distribution)



Two operational proposals:

› 1 Sharing a model:– a “model” of statistical units is essential for successful profiling– all countries need to use the same standards (for profiling both

MNEs and large domestic groups)– national accounts systems: we recognise that the new UN-SNA

manuals focuses on the legal units; what about the new EU-ESA?

› 2 Dealing with complexity:– we cannot deal with all cases (initially or indeed in the future)– we need a mechanism to develop rules based on new cases

(within the BRWG or the EGR Steering Group?) rather than a complete set of new rules

– new rules and mechanism must include treatment of holdings, SPEs, off-shoring, family closed companies, family groups, accountancy firms and other partnerships, etc



Three operational questions(1) :› Do we propose a process with, first, top-down profiling, then,

completed with bottom-up information?– delineating the global enterprise group by creating a cluster of

all legal units belonging to the group– investigating the operational structure (as independently as

possible from “legal” or administrative structure)– identifying all market-oriented entities (as the basement for the

future enterprises) and allocating all other entities to these– link (at least try to ) all legal units to enterprises (recognising

that relationships can be: 1 to1; several to 1; many to many)

› Which is very different from the present definition (largely bottom-up):– only way to deal with groups with hundreds of affiliates, – avoiding time lag and quality problems of administrative data, – improving the cost /efficiency ratio

But leading to the following questions:



Three operational questions (2):

› Do we propose to use (largely) the IFRS (the EU-GAAP)?

thus needing to study their pros and cons:– Pros:

– Most widespread “administrative” “ EU” standards– Good standardisation of elementary flows and stocks– Compulsory for stock-traded and bond-traded groups– Include “operational segments” (with turn-over,

operational results and employment figures)– Cons:

– Consolidated data (no national figure if intra-group flows) and sometimes at levels lower than UCI

– No standardised publication tables– Uncertain stability for the operational segments



Three operational questions (3):

› Do we propose to restore consistency between EU and national statistics, through assigment of dual (plural) classifications to statistical units

– Group-consistent classification– Own-activity classification (solves ancillary activities

problem and also commercial but not trade activities problems)



leading to 3 main types of options:› 1 the so-called “no change” option:

– sticking to the present definition of enterprises– with necessary operational changes to really apply it

› 2 the “minor change” option– clarifying the definition of enterprises (what reference territory: each country /

a zone / the world? what type of relations with legal units?) in comparison to operational segments of the Group

– introducing either “truncated GODS” as enterprises or “truncated enterprises”– with international coordination (list and composition of enterprises)– Statistical work remaining purely national

› 3 the “complete change” option– First global: for the listing of GODs and enterprises– Statistics mainly based on consolidated information (highest level possible)

or on “consolidation system” at least for FATS data (ISIC/NACE; turn-over; employment)

– Then allocation to countries (process to be designed)



the first « examples » studied

› testing, iterations and early results are objectives throughout the project

› but restricted to “examples” until now

› first “cases” studied in common: – 4 groups within the motorcar industry (to check their similarities and differences)– a list of differentiated MNEs (in industry, trade and services, all largely

widespread in EU, some with SPEs), most of them being seen from at least two countries point of view



the future work

› Next Workshop in Paris in June, main discussion on:– Options for the profiling– Draft report on statistical units

› Needed discussion from EU and non EU statisticians

› For EU members, all papers of the ESSnet on CIRCA / BRnet / Profiling, for information and comment

Thank you for attention and comments

pierre teillet vincent hecquet the eu essnet project on essnet on « profiling large and complex...

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