Unternehmensrechnung in der Beratungspraxis

Vorlesung Unternehmensrechnung an der LMU 3. Mai 2016 Unternehmensrechnung in der Beratungspraxis Exemplarische EY Beratungsfälle

Building a better working world Die EY Service Lines Assurance Services Quartals-, Jahres- und Konzernabschlüsse prüfen Nachhaltigkeitsberatung und - Prüfung Wirtschaftskriminalität bekämpfen Junge und dynamische Teams Verantwortung vom ersten Tag an Internationale Erfahrung sammeln Flache Hierarchien Transaction Advisory Services Unternehmenstransaktionen gestalten Firmen den Turnaround ermöglichen Advisory Services Performance erhöhen IT optimieren Risiken senken Tax & Law Services Steuerdschungel lichten Internationale Mandanten beraten Page 2

Agenda Introduction Importance of Accounting Confidence Case 1: Management Performance Reporting Case 2: Accounting for divestments and carve-outs Case 3: Big data strategy to support the finance function Page 3

Introduction Importance of accounting confidence Questions for the board Do you have confidence in your organization s accounting? Do you want to safeguard your financial reputation? Do you wish to have an understandable and reliable presentation of results? Would you like to minimize the amount of press attention your accounting policies attract? Accounting confidence Do you need to understand how your accounting policies compare with those of your peers? Do you need to secure a rapid identification of issues and correction of processes? Page 4

Introduction Importance of accounting confidence Landscape of financial reporting interfaces Restructuring Valuation Refinancing Tax structuring Buy-side or vendor due diligence Working capital management Covenant assistance Tax reporting IT security Transaction accounting Cash flows Financial closing process IT systems Accounting recommendations Highyield filing documentation Accounting and financial process Financial reporting and KPIs Forecast/ budget process Carve-outs New regulatory requirements Management information reporting Business plan Organization review IFRS services IPO and listing services Internal audit Business modeling Legal contract review Mergers and acquisitions Law Risk management Page 5

Introduction Importance of accounting confidence Accounting fraud destroys confidence Opportunity (e.g. weakness in internal control) Pressure / Incentive (e.g. economic or psychological need) Fraud triangle Rationalization / Attitude (e.g. I deserve more ) Normal accounting tolerance Fraudulent Aggressive Careless Uncomfortable Middle of the road Overly prudent Page 6

Introduction Importance of accounting confidence The benefits Creating accounting confidence breeds confidence throughout the organization, which permeates out to the market. Internal Staff retention, through honesty and integrity A repeatable process at each period end and a smooth, efficient audit of the results Quality communication Transparent underlying business performance with high-quality communication A chance to reset and to create consistency in global financial reporting Stakeholder confidence The appreciation of stakeholders, who reward openness Clarity, with KPIs and management incentives matched to GAAP measures Market stability The appreciation of the markets, which reward openness Increased confidence in the minds of investors, analysts and market commentators Confidence in accounting means that companies can focus on operational and performance imperatives. Page 7

Management performance reporting Principles of efficient financial and KPI reporting Principles of efficient reporting KPIs Goal 1 Adapt content for various users Develop simplified analytical aggregates Use accounting data Banks EBITDA Cash flows Net debt and covenants Improve financial performance of the group Reduction of debt 2 Align your internal processes to generate relevant information Develop optimized data-production processes (with relevant periodicity and homogeneity in methods) Increase the quality of internal controls Shareholders Key financial indicators at a group or corporate level P&L indicators (sales, EBITDA, EBIT, PBT, NR) Cash flows or working capital Net debt and covenants CAPEX Improve financial performance of the group Review of the group strategy Approval of the financial reporting Steering of the business 3 Align your IT systems to provide a consistent overview Use existing IT system as much as possible Ideally, have a single department accountable for each system Management Key financial indicators: Invoiced sales (by business line) Gross margin by item (average, deviation etc.) Performance of business line, agencies DSO receivables and payables P&L indicators (sales, EBITDA, EBIT, PBT, NR) Net debt and covenants B/S and WCR Cash flows CAPEX Improve financial performance of the group Review of the group strategy Approval of the financial reporting Steering of the business Internal benchmarking between business units Page 9

Management performance reporting EY approach 1 Successful financial and KPI reporting is the result of getting the right balance between processes, IT systems and the organization. IT systems For example, reviewing the balance between a resource-consuming reconciliation process and an integrated workflow between different IT systems should be undertaken on a case-by-case basis. Organization Reporting Processes and controls Short-term results should be achieved, while medium-term efficient methods of working (IT architecture, roles and responsibilities) at the organization should be preserved. 2 Financial and KPI reporting is decision-making oriented. Accounting data Strategic vision KPIs Operations It should support management in implementing a growth strategy. As such, it must be aligned with the future of the company and not only with its current state. The reporting should support the analyses of the organization s performance drivers. 3 Financial and KPI reporting reinforces the organization s culture. It allows stakeholders to see their contributions to the value creation. It constitutes the backbone for discussions and decisions on implementing the company strategy. All stakeholders should participate in the design and implementation of the KPIs and reporting structure. Page 10

Management performance reporting EY consulting process Design Implementation Step 1 Step 2 Step 3 Step 4 Pre-diagnostic Detailed analysis Design of future report Implementation Objectives Determine the financial reporting analysis parameters Identify the group accounting policies (foreign entities) Identify key contacts and specificities Make a diagnosis of the existing reporting processes (financial and operational) Create an inventory of KPIs to identify those missing Evaluate IT system and analyze its ability to meet expectations Define KPIs and design the new reporting format (financial and operational) Make recommendations to adapt the current IT system to implement the new reporting: interfaces, financial flows integration, specifications Manage the project and its implementation Support the implementation the new format and content Assist the company during the first release of reports Client training Deliverables Pre-diagnostic report Road map to prioritize and define a work plan Outline of the reporting currently produced, validated by stakeholders (PE etc.) and the company A pilot report Specification for complete IT implementation (optional) A guidance manual Help ensure the team has the knowledge and tools to continue to produce the management reports Page 11

Accounting for divestments and carve-outs Importance of financial information for divestment success EY studies reveal that: Forty-six percent of global corporations are in the process of divesting or plan to divest in the next two years. Nearly 77% intend to accelerate their divestment strategy over the same period. Fewer than 50% of organizations carry out all the key steps to enhance the value story for their divestments. More than 50% of those selling assets do not position their divestment in the most appealing way to the widest range of potential buyers. As a result, they fail to maximize the value of their divestment. Accounting and financial reporting needs Page 13

Accounting for divestments and carve-outs Risk landscape of financial reporting for divestments Multiple risk factors Accounting for business transactions is one of the most frequent sources of error in financial reporting. Business transactions are frequently complex and call for the involvement of numerous specialists (legal, tax, accounting, etc.). Business transactions have a significant influence on a group's financial position and results of operations. The accounting for a transaction at inception has a considerable impact on future accounting-related risks (for example, impairment). Page 14

Accounting for divestments and carve-outs Complexity of financial information for divestments Typical scenarios Consistent source data is required and must be reconciled if both are to be prepared Transaction presents a lack of clear, relevant, reliable or audited financial information: Carve-outs Divisions rather than legal entities Entities or divisions not audited Deal perimeter subject to change Bridging required for differing data sources Definition of nature of financial information, including perimeter and adjustments Need for dedicated and specialist accounting team with an understanding of the transaction scenario Expertise in data extraction, consolidation and preparation of integrated information across multiple periods Deployment of technology and accounting solutions outside of standard ERP and group reporting system Clarity over audit trail, assessment of auditability and interface with auditors Financial information to support funding E.g., bond markets Full three-year financial statements: IFRS or US-GAAP Financial information to support historical performance E.g., investment criteria or value drivers Deal-specific financial information that reflects transaction perimeter Page 15

Big data strategy to support the finance function Starting with a self-assessment How mature is your big data approach? Basic Developing Established Advanced Leading Data is scattered throughout the firm. Each business unit produces and manages its own data for its own purpose. There is no awareness of the value of the data. There is an awareness of cross-business data emerging regarding strategic data, mainly around customer experience, human resources or products depending on the industry. Top management has to decide which data should be processed across the business unit. A big data strategy has been defined by senior management. It is focused on: (i) Conserving and protecting the key data of the firm (ii) Protecting the firm against major reputational and legal risks In that environment, macro KPIs are designed to follow this strategy. A big data strategy is accepted across the business and resources are dedicated to its governance (CDO or chief privacy officer); there is dedicated budget and human resource, and a review of action plans. Producing quality data is a strategic priority, as it could produce a full revenue stream in its own right. Partnerships for sharing and exchanging data are in place to optimize their value. Page 17

Big data strategy to support the finance function EY approach a three-phase approach to effective big data use Very few firms fully exploit the potential of their data or even regard it as a corporate asset. EY uses a three-phase approach to unlock the value of data assets gradually. Usage of big data (internal and external data) Access to more internal data Currently used data Detect hidden gems in the data Explore desired data and increase insights Use data efficiently and get it fast Phase 3 Uncover hidden patterns within existing data and explore relationships with more data Phase 2 Unlock internal data by starting to use new techniques on structured and unstructured data Phase 1 Clean up currently used data and improve reporting processes Increasing complexity of mathematical algorithm Usage of visualization tools and techniques Page 18

Big data strategy to support the finance function Example: Process mining (1/2) Current accounting systems split recorded data in individual data points neglecting existing relations. With process mining it is possible to identify and visualize the relevant data and respective relations. Page 19

Big data strategy to support the finance function Example: Process mining (2/2) Focus: Visualization of data and respective relations Process Mining - Approach Extraction and processing of log files to generate the relevant data records Start Journal entry Processing of the generated data records by appropriate Process Mining Software Software Journal entry correction Four-eyeprinciple Process violation Visualization of the process flow lying in the data record as a starting point for further analyses Journal entry confirmation Process Mining allows to identify process violations and risk areas within processes Page 20

Questions? Introduction Importance of Accounting Confidence Case 1: Management Performance Reporting Case 2: Accounting for divestments and carve-outs Case 3: Big data strategy to support the finance function Page 21

Upcoming EY events an der LMU EY Audit Challenge Großer EY Fallstudienwettbewerb für Studenten aus Deutschland, Schweiz und Österreich Erste Runde am 11.5.2016, 14-17 Uhr im EY Office in München Anmeldung über Lehrstuhl-Sekretariat noch bis 4.5.2016 möglich Karrieremesse EY nimmt am 23./24.5.2016 am Firmenkontaktgespräch der LMU teil EY Valuation Workshop Ergänzung zur Vorlesung Financial Statement Analysis and Valuation Einblicke in die Praxis der Unternehmensbewertung durch EY Valuation Professionals 20.5.2016, 16-18 Uhr im EY Office in München mit anschließendem Get-together Anmeldung über Lehrstuhl-Sekretariat noch bis 9.5.2016 möglich Deutschlandstipendium EY fördert vier Deutschlandstipendiaten an der LMU Offizielle Vergabefeier am 3.6.2016 Accounting für M&A Transaktionen Vorlesung von Prof. Sven Hayn (EY Partner) am Lehrstuhl Prof. Sellhorn auf Masterstufe am 24.5.2016 Page 22

Referent Dr. Philipp Gaenslen Partner / Assurance - EY München Tel +40 89 14331 17156 Mobil +49 160 939 17156 Fax +49 181 3943 17156 E-Mail philipp.gaenslen@de.ey.com Page 23

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