top 4 challenges in financial reporting and how to overcome them
DESCRIPTION
This presentation explores the realities and challenges of financial reporting. Whether it be hiring the right people or keeping track of standards, there are many challenges encroaching on the financial reporting world, but there are also many exciting solutions that will both expedite and improve the financial reporting process.TRANSCRIPT
Top 4 Challenges in Financial Reporting and How to Overcome Them
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
2
Financial reporting is entering a new age of regulation.
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
3
With each added rule or changing standard, more
responsibility is placed on filers to comply.
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
4
This pressure comes from:
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
5
Regulating bodies like the SEC...
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
6
…investors and stakeholders…
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
7
…and even from within the filing company.
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
8
Public companies
satisfywant to
everyone’s interests.
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
9
This means pleasing stakeholders,
maintaining regulatory favourability and
doing so cheaply and e�ciently.
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
10
Here are 4 financial reporting challenges currently faced by public companies:
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
11
Finding and
Keeping Talent
Keeping Track of
Changing Financial
Reporting Standards
Managing
Internal Controls
Staying Ahead
of Peers
NO.
1NO.
2
NO.
3NO.
4
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
12
Finding and Keeping Talent
NO.
1
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
13
REALITYTHE
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
14
45% of CFOs anticipate they will be hiring in 2013.
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
15
To handle forthcoming changes, hiring strategies will
emphasize roles that specialize in a niche area of the
finance department.
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
161 McCann, David. “Six Finance Jobs Ripe for Hiring in 2013.” CFO.com. N.p., 3 Feb. 2013. Web. 5 May 2013. <http://www3.cfo.com/article/2013/2/hiring_ctpart-ners-careers-hot-finance-positions-2013>
Expect to see more positions for:1
In-houseXBRL experts
Compliancemanagers
Risk o�cers Government and regulatory a�airs o�cers
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
17
CHALLENGETHE
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
18
Many executive leaders are complaining about
a talent shortage.
OPENINGS TALENT
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
19
We find it di�cult to find highly skilled people
with the combination of the exact skill set and
experience that we are looking for.2
2 “Human-Capital Strategies in a Slow Recovery.” CFO.com. CFO Research Services, 2012. Web. 30 May 2013. <http://secure.cfo.com/whitepapers/index.cfm/download/14660274>
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
20
SOLUTIONTHE
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
21
Hire and educate from within the company
Purchase top of the line technology to
supplement skilled labour
Attract top talent with appealing compensation
and pension plans
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
22
The Dodd-Frank Act, BASEL III, changes to U.S. GAAP
and the end of the XBRL grace period are four prime
opportunities for financial professionals on the move
to specialize their skills.
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
23
(Knowing XBRL) has improved my career
exponentially. It has given me a valuable niche in
the company.
Je� Petka — Financial Accountant at Southern Company
and a member of the XBRL team.3
3 Sheridan, Bill, and Jeff Drew. “The Future Is Now: XBRL Emerges as Career Niche.” The Future Is Now: XBRL Emerges as Career Niche. N.p., June 2012. Web. 30 May 2013. <http://www.journalofaccountancy.com/Issues/2012/Jun/20124962.htm>
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
24
Keeping Track of Changing Financial Reporting Standards
NO.
2
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
25
REALITYTHE
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
26
In the wake of the 2008 financial crisis,
regulatory and standards bodies are building
stronger and more complex safety nets.
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
27
This has resulted in a surge of accounting
standard updates coming to U.S. GAAP.
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
28
Finance professionals strive to prepare for changes
to accounting standards as FASB and the IASB
make changes to:
Financial Instruments
Leases
Revenue Recognition
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
29
Finance professionals will also be a�ected by:
Pay or Play rules under
ObamaCareThe
Dodd-Frank Act
Basel IIIThe
JOBS Act
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
30
CHALLENGETHE
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
31
These changes a�ect daily reporting procedures as
well as internal controls and audits.
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
32
I cringe when I hear talk about more reporting
requirements and disclosure. Those requirements
are very burdensome for a small-cap or midcap
company. Further financial reporting and
disclosures would just add to that burden.4
4 McCann, Dave. “Power from the People.” CFO.com. N.p., 1 Nov. 2011. Web. 30 May 2013. <http://www.cfo.com/printable/article.cfm/14604427>
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
33
SOLUTIONTHE
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
34
Monitor upcoming accounting standard updates
Contribute to comments on exposure drafts if
your company will be negatively impacted
Keep tabs on early adopters, using their filings as
benchmarks for your own
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
35
Financial-and-administrative-process
improvement would yield a meaningful
financial benefit to my company.5
A CFO research study cited that 78% of respondents
said their companies make extensive use of benchmarks and agree
strongly with the statement that,
5 Surka, Matt, and Josh Hyatt. “The Long and Winding Road.” CFO.com. N.p., 8 Oct. 2012. Web. 30 May 2013. <http://www3.cfo.com/article/2012/10/benchmark-ing_cfo-research-benchmarking-business-processes?currpage=1>
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
36
Managing Internal Controls
NO.
3
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
37
REALITYTHE
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
38
SEC regulations and FASB pronouncements
have resulted in
SUBSTANTIALCHANGES
to disclosure, U.S. GAAP and XBRL.
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
39
Public companies must adjust their reporting
practices to comply.
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
40
CHALLENGETHE
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
41
As a result of changing standards, internal controls
have to adapt to fit or else the risk of deficiencies
and material weaknesses increases exponentially.
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
42
Large scale accounting changes may be di�cult
because they can involve revamping processes,
reassessing emerging risks and retraining sta�.
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
43
CFOs and their sta� who have put o� updating
their internal controls until new guidelines are
released may find out they have a lot more work
to do. That's especially so for finance folks who
work for small and medium size entities, which
tend to have fewer resources than their peers at
bigger companies do.6
6 Brands, Kristine. “Growing Companies Need Internal-Controls Help.” CFO.com. N.p., 16 Apr. 2013. Web. 30 May 2013. <http://www3.cfo.com/article/2013/4/gaap-ifrs_coso-financial-reporting-compendium->
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
44
SOLUTIONTHE
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
45
Monitor exposure drafts and upcoming changes to SEC regulations
in order to anticipate how changes will a�ect the controls
An internal auditing team that has access to changing regulations
and can identify weaknesses in reporting practices will be more
prepared to catch errors
Use available resources as benchmarks, like peer filings and
disclosures, to help implement best practices into risk
management systems
You need to stop the bleeding,” says Ralph Geertsema, a director of
SeventyOne. “However many resources you need, that’s what it takes7
7 Surka, Matt, and Josh Hyatt. “The Long and Winding Road.” CFO.com. N.p., 8 Oct. 2012. Web. 30 May 2013. <http://www3.cfo.com/article/2012/10/benchmark-ing_cfo-research-benchmarking-business-processes?currpage=1>
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
46
With only 45% of respondents saying the
majority of their critical risks are well managed,
the door to an expanded role is open and
internal audit must walk through it and take on
the attendant challenges.8
8 “Aligning Internal Audit Are You on the Right Floor?” PricewaterhouseCoopers LLP. N.p., 2012. Web. 30 May 2013. <http://www.pwc.com/en_US/us/risk-assur-ance-services/internal-audit/publications/assets/pwc-2012-state-of-internal-audit-survey.pdf>
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
47
Staying Ahead of Peers
NO.
4
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
48
REALITYTHE
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
49
It’s survival of the fittest out there.
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
50
There is a need for companies to think forward
using information substantiated by real evidence
and competitive intelligence.
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
51
CHALLENGETHE
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
52
In order to keep up, companies are investing in
technologies and talent — even changing their
business strategies in order to keep up.
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
53
And yet, many must grapple with the challenges of
choosing the right direction.
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
54
SOLUTIONTHE
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
55
Monitor peers and all industry players with
real-time information and enhanced data analysis
Make strategic business partnerships based on
informed and compatible interests
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
56
In organizations that excel at making critical
judgments, the CFO and CIO understand the
specific decisions facing business leaders, the
financial information that can be used to help
drive those decisions, and the techniques
available to produce information quickly, easily,
and accurately,
says Robert Comeau, a principal with Deloitte Consulting LLP’s Finance
Transformation service.9
9 “CIO, CFO Unite to Improve Business Decision-Making.” Wall Street Journal. Deloitte, 10 Jan. 2013. Web. 30 May 2013. <http://deloitte.wsj.com/cio/2013/01/10/cio-cfo-collaboration-can-improve-business-decision-making/>
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
57
Learn more about how disclosure research solutions can help you solve and enhance your financial reporting processes so that reporting challenges become opportunities.
www.DisclosureNet.com | Copyright © 2013 DisclosureNet™
58
Contact us.
DisclosureNet™330 Bay Street, Suite 200Toronto, ON M5H 2S8T: 866.974.3638F: 416.913.0446
General InquiriesT: 866.974.3638 [email protected]
SolutionsT: 866.974.3638 [email protected]