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© 2014 IBM Corporation

Reporting Challenges for Accounting and Finance by: Paul Young, CPA, CGA – OOF/Risk Analytics Proven Practice AdviserDate: November 19,2016

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Author / Bio

September 9, 2014

• Paul Young, CPA, CGA• SME – Financial Performance Management (TM1, Cognos Controller

and Cognos Disclosure Management, OpenPages, Algorithmics, Cognos Integrated Server, Cognos Command Center and Datawath

• Industry Experience• 15+ years in Corporate Reporting, Budget & Forecasting,

Costing, Business Process Management, Internal Audit and Controls, Risk Management, Financial Analysis, Costing

• 8+ years teaching Advance Finance, Advance Accounting, Public Finance and Advance Management Information Systems

• Blogger in areas like Finance Analysis, Government policies, market segment

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Agenda

September 9, 2014

• Reporting Areas for Business• Internal Audit• Reporting Trends• Accounting Standards

• FASB• IASB• BEPS• Risk Management

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Internal Audit

September 9, 2014

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Internal Audits – IT Focus

September 9, 2014

Source - https://www2.deloitte.com/content/dam/Deloitte/uk/Documents/financial-services/deloitte-uk-it-internal-audit-2016.pdf

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Overview

• Internal Audit functions in house• External Audit costs• Need to have better control of

audit control process• New areas of focus

• IoT• Big Data• Cybersecurity

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Issues Business• High Cost of Compliance• Operation Risk

• Supply Chain• Retail and Distribution Channel

• Ongoing audit triggers• Quicker trigger on events• Ability to modify audit programs on the fly

part of the overall risk assessment

© 2012 IBM CorporationSeptember 9, 2014

© 2012 IBM CorporationSeptember 9, 2014

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Reporting focus 2017 – Office of the Finance

September 9, 2014

http://ww2.cfo.com/analytics/2016/11/cfos-top-goal-2017-better-analysis-reporting/

httSoup://ww2.cfo.com/analytics/2016/11/cfos-top-goal-2017-better-analysis-reporting/

• Key quote “Modern CFOs are transforming from backroom accountants into boardroom advisers and say improving reporting and analysis functions in 2017 is a top improvement goal, according to a new survey by the consulting firm Kaufman Hall. More than 70% of over 380 finance executives polled say supporting decision-making is their number-one goal for 2017, a divergence from the more traditional finance and accounting roles. Over 90% say they need to do more with the financial and operations data at hand to help top management make critical decisions.” Source - http://ww2.cfo.com/analytics/2016/11/cfos-top-goal-2017-better-analysis-reporting/ • FOPM/FPM solutions• Costing Model• Predictability with Cash Flow• Market Trends Analysis• Tax planning and reporting• New Product Launch• Operational Risk (Supply Chain Management)

• More and more companies are going eCommerce - http://www.slideshare.net/paulyoungcga/retail-sales-united-states-october-2016

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FASB / Projects

September 9, 2014

Restricted Cash(ASU 2016-18 issued 11/17/16)Consolidation: Interests Held through Related Parties that Are under Common Control(ASU 2016-17 issued 10/26/16)

Accounting for Income Taxes: Intra-Entity Asset Transfers(ASU 2016-16 issued 10/24/16. Last updated June 22, 2016.)Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments(ASU 2016-15 issued August 26, 2016. Updated September 1, 2016)Financial Statements of Not-for-Profit Entities(ASU 2016-14 issued 08/18/16)Accounting for Financial Instruments—Credit Losses(ASU 2016-13 issued 06/16/16)Improving the Equity Method of Accounting(Project removed from agenda 05/11/16. Updated May 11, 2016)Revenue Recognition—Narrow-Scope Improvements and Practical Expedients(ASU 2016-12 issued 05/09/16. Updated May 20, 2016)Revenue Recognition—Identifying Performance Obligations and Licenses(ASU 2016-10 issued 04/14/16. Updated May 20, 2016)

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FASB

September 9, 2014

Employee Share-Based Payment Accounting Improvements(ASU 2016-09 issued 03/30/16. Updated April 4, 2016)Revenue Recognition—Principal versus Agent (reporting revenue gross versus net) (ASU 2016-08 issued 03/17/16. Updated March 2, 2016)Simplifying the Transition to the Equity Method of Accounting (ASU 2016-07 issued 03/15/16. Updated March 17, 2016)Contingent Put and Call Options in Debt Instruments (ASU 2016-06 issued 03/14/16. Updated February 8, 2016)Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships (ASU 2016-05 issued 03/10/16. Updated February 8, 2016)Recognition of Breakage for Prepaid Stored-Value Products(ASU 2016-04 issued 03/08/16. Updated February 8, 2016)PCC Issue No. 2015-01, Effective Date and Transition(ASU 2016-03 issued 03/07/16)Leases(ASU 2016-02 issued 02/25/16emoved from Research Agenda 02/03/16)Accounting for Financial Instruments—Classification and Measurement(ASU 2016-01 issued 01/05/16)

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IASB (International Accounting Standards Board) – Current projects

September 9, 2014

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IASB (International Accounting Standards Board) – Completed

September 9, 2014

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IASB (International Accounting Standards Board) – Completed

September 9, 2014

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Key Standards

September 9, 2014

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New – Revenue Recognition Standard (Effective Date 2018)

September 9, 2014

• The new guidance will affect almost every entity that recognizes revenue from contracts with customers, so financial executives will need to determine how to apply the new standard. Source - http://daily.financialexecutives.org/5-steps-to-the-new-revenue-recognition-standard/

• While the majority of companies have started analyzing the impact of the new standard, few have taken the next steps toward implementation. For those that have not yet started or completed their initial assessment – including private companies that have an extra year to comply – the time to act is now. Revenue recognition is a critical and often complex accounting area that companies can't afford to get wrong. Many boards and investors will want to know what to expect. Regulators will be looking for increased disclosures in 2016 10-Ks and during 2017 as adoption draws closer. In our experience, the first movers have been companies in highly impacted industries, including technology and software. Certain of these companies are reaping benefits from an early start by approaching the required changes in a way that will help improve their operations beyond financial reporting. Source - http://www.pwc.com/us/en/audit-assurance-services/accounting-advisory/revenue-recognition-survey.html

• FOPM/FPM • Opportunities to help with restatements and/or budget process as

part of building revenue new models.

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New – Leases (effective Date 2019)

September 9, 2014

• When the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) issued their new lease-accounting standard in early 2016, the clock started ticking on a sweeping set of changes that companies are going to have to implement in the next two years. But the adjustments will be needed beyond the accounting department because the new rules will impact any department that deals with leases—including procurement and corporate real estate—and virtually all of the systems and processes that companies use in managing their lease data. At this still-early stage, companies’ main concern does not lie principally in understanding the new rules, which, from a technical accounting perspective, are straightforward enough. In fact, in a June 2016 survey by PwC and CBRE, less than half of all companies said they thought the accounting policy itself would be hard to implement.1 More companies said they expected the difficulties to come from the systems they’ll have to put in place to meet the new requirement and from their resource constraints. Source - http://www.pwc.com/us/en/audit-assurance-services/accounting-advisory/leasing-change-impact-systems-data-processes.html

• FOPM/FPM • Opportunities to build new leasing models. The leasing models

could be a good opportunity to produced a pre-built solution for leases

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BEPS

September 9, 2014

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• What is BEPS• Base erosion and profit shifting (BEPS) refers to tax avoidance strategies that exploit

gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations. Under the inclusive framework, over 100 countries and jurisdictions are collaborating to implement the BEPS measures and tackle BEPS.

• BEPS Requirement• Mandate to reporting profit by country – Source:

https://www.oecd.org/ctp/beps-action-13-guidance-implementation-tp-documentation-cbc-reporting.pdf

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Risk Management

September 9, 2014

• Risk Management• The total global expenditure on risk IT systems and services by financial institutions

(FIs) will be $70bn during 2016.

• The two biggest areas for investment are in the risk governance and integration field ($22.4bn), which is being driven by compliance demands, stress test reporting obligations and risk data aggregation requirements, and financial crime risk, which follows closely behind in terms of growth, as cyber and fraud risks multiply and converge.

• The Chartis 2016 Global Risk IT Expenditure report aggregates all of the firm’s 2015 research to derive a global risk IT spend. The market sizing exercise by Chartis is based on a comprehensive bottom up methodology driven by thousands of demand side data points. Furthermore, the analysis has been validated by top-down data from hundreds of technology vendors and consulting firms.The report provides an overview of the risk technology market and forecasts 2016 expenditure for specific risk categories, examining the regulatory, operational and reputational drivers for different sizes of financial institution (FI) and across different regions

• Source - http://www.chartis-research.com/research/reports/global-risk-it-expenditure-in-financial-services-2016

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Summary

September 9, 2014

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• Many challenges face Office of the Finance as part of supporting both internal and external reporting requirements

• Key standards like leasing, joint venture and revenue recognition/contracts will drive the need for business to look at their FOPM/FPM solutions

• Risk Management is becoming very important for management as part of managing issues related to exposure to events. (Supply Chain)

• BEPS will change how tax reporting will be done for many entities as part of closing loop holes related to profit shifting

• Integrated reporting which includes FP&A along with sustainable reporting and risk management will grow in terms importance for regulatory agencies.

• Ability of companies to adjust to market conditions, especially with eCommerce predicted to grow to about 20% of a retailer’s sales by 2020.

© 2012 IBM CorporationSeptember 9, 2014

• Contact information• Paul Young (email: paul.young@ca.ibm.com)• IBM Close, Consolidating and Reporting, Risk and Planning

Analytics• http://www.ibm.com/analytics/us/en/business/financial-reporting/• http://www-03.ibm.com/software/products/en/planning-analytics• http://www.ibm.com/analytics/us/en/business/governance-risk-compliance/