Top 4 Challenges in Financial Reporting and How to Overcome Them

transcript

Financial reporting is entering a new age of regulation.

With each added rule or changing standard, more

responsibility is placed on filers to comply.

This pressure comes from:

Regulating bodies like the SEC...

…investors and stakeholders…

…and even from within the filing company.

Public companies

satisfywant to

everyone’s interests.

This means pleasing stakeholders,

maintaining regulatory favourability and

doing so cheaply and e�ciently.

Here are 4 financial reporting challenges currently faced by public companies:

Finding and

Keeping Talent

Keeping Track of

Changing Financial

Reporting Standards

Managing

Internal Controls

Staying Ahead

of Peers

Finding and Keeping Talent

REALITYTHE

45% of CFOs anticipate they will be hiring in 2013.

To handle forthcoming changes, hiring strategies will

emphasize roles that specialize in a niche area of the

finance department.

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

CHALLENGETHE

Many executive leaders are complaining about

a talent shortage.

OPENINGS TALENT

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>

SOLUTIONTHE

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

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.

(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>

Keeping Track of Changing Financial Reporting Standards

REALITYTHE

In the wake of the 2008 financial crisis,

regulatory and standards bodies are building

stronger and more complex safety nets.

This has resulted in a surge of accounting

standard updates coming to U.S. GAAP.

Finance professionals strive to prepare for changes

to accounting standards as FASB and the IASB

make changes to:

Financial Instruments

Leases

Revenue Recognition

Finance professionals will also be a�ected by:

Pay or Play rules under

ObamaCareThe

Dodd-Frank Act

Basel IIIThe

JOBS Act

CHALLENGETHE

These changes a�ect daily reporting procedures as

well as internal controls and audits.

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>

SOLUTIONTHE

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

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>

Managing Internal Controls

REALITYTHE

SEC regulations and FASB pronouncements

have resulted in

SUBSTANTIALCHANGES

to disclosure, U.S. GAAP and XBRL.

Public companies must adjust their reporting

practices to comply.

CHALLENGETHE

As a result of changing standards, internal controls

have to adapt to fit or else the risk of deficiencies

and material weaknesses increases exponentially.

Large scale accounting changes may be di�cult

because they can involve revamping processes,

reassessing emerging risks and retraining sta�.

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->

SOLUTIONTHE

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>

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>

Staying Ahead of Peers

REALITYTHE

It’s survival of the fittest out there.

There is a need for companies to think forward

using information substantiated by real evidence

and competitive intelligence.

CHALLENGETHE

In order to keep up, companies are investing in

technologies and talent — even changing their

business strategies in order to keep up.

And yet, many must grapple with the challenges of

choosing the right direction.

SOLUTIONTHE

Monitor peers and all industry players with

real-time information and enhanced data analysis

Make strategic business partnerships based on

informed and compatible interests

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/>

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