Top 4 Challenges in Financial Reporting and How to Overcome Them

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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.

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Top 4 Challenges in Financial Reporting and How to Overcome Them

  1. 1. Top 4 Challenges in Financial Reporting andHow to Overcome Them
  2. 2. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™2Financial reporting is entering anew age of regulation.
  3. 3. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™3With each added rule or changing standard, moreresponsibility is placed on filers to comply.
  4. 4. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™4This pressure comes from:
  5. 5. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™5Regulating bodies like the SEC...
  6. 6. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™6…investors and stakeholders…
  7. 7. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™7…and even from within the filing company.
  8. 8. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™8Public companiessatisfywant toeveryone’s interests.
  9. 9. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™9This means pleasing stakeholders,maintaining regulatory favourability anddoing so cheaply and efficiently.
  10. 10. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™10Here are 4 financial reportingchallenges currently faced bypublic companies:
  11. 11. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™11Finding andKeeping TalentKeeping Track ofChanging FinancialReporting StandardsManagingInternal ControlsStaying Aheadof PeersNO.1NO.2NO.3NO.4
  12. 12. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™12Finding andKeeping TalentNO.1
  13. 13. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™13REALITYTHE
  14. 14. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™1445% of CFOs anticipate they will be hiring in 2013.
  15. 15. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™15To handle forthcoming changes, hiring strategies willemphasize roles that specialize in a niche area of thefinance department.
  16. 16. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™161McCann, 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:1In-houseXBRL expertsCompliancemanagersRisk officers Governmentand regulatoryaffairs officers
  17. 17. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™17CHALLENGETHE
  18. 18. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™18Many executive leaders are complaining abouta talent shortage.OPENINGS TALENT
  19. 19. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™19We find it difficult to find highly skilled peoplewith the combination of the exact skill set andexperience that we are looking for.22“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>
  20. 20. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™20SOLUTIONTHE
  21. 21. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™21Hire and educate from within the companyPurchase top of the line technology tosupplement skilled labourAttract top talent with appealing compensationand pension plans
  22. 22. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™22The Dodd-Frank Act, BASEL III, changes to U.S. GAAPand the end of the XBRL grace period are four primeopportunities for financial professionals on the moveto specialize their skills.
  23. 23. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™23(Knowing XBRL) has improved my careerexponentially. It has given me a valuable niche inthe company.Jeff Petka — Financial Accountant at Southern Companyand a member of the XBRL team.33Sheridan, 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>
  24. 24. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™24Keeping Track ofChanging FinancialReporting StandardsNO.2
  25. 25. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™25REALITYTHE
  26. 26. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™26In the wake of the 2008 financial crisis,regulatory and standards bodies are buildingstronger and more complex safety nets.
  27. 27. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™27This has resulted in a surge of accountingstandard updates coming to U.S. GAAP.
  28. 28. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™28Finance professionals strive to prepare for changesto accounting standards as FASB and the IASBmake changes to:Financial InstrumentsLeasesRevenue Recognition
  29. 29. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™29Finance professionals will also be affected by:Pay or Play rules underObamaCareTheDodd-Frank ActBasel IIITheJOBS Act
  30. 30. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™30CHALLENGETHE
  31. 31. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™31These changes affect daily reporting procedures aswell as internal controls and audits.
  32. 32. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™32I cringe when I hear talk about more reportingrequirements and disclosure. Those requirementsare very burdensome for a small-cap or midcapcompany. Further financial reporting anddisclosures would just add to that burden.44McCann, Dave. “Power from the People.” CFO.com. N.p., 1 Nov. 2011. Web. 30 May 2013. <http://www.cfo.com/printable/article.cfm/14604427>
  33. 33. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™33SOLUTIONTHE
  34. 34. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™34Monitor upcoming accounting standard updatesContribute to comments on exposure drafts ifyour company will be negatively impactedKeep tabs on early adopters, using their filings asbenchmarks for your own
  35. 35. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™35Financial-and-administrative-processimprovement would yield a meaningfulfinancial benefit to my company.5A CFO research study cited that 78% of respondentssaid their companies make extensive use of benchmarks and agreestrongly with the statement that,5Surka, 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>
  36. 36. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™36ManagingInternal ControlsNO.3
  37. 37. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™37REALITYTHE
  38. 38. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™38SEC regulations and FASB pronouncementshave resulted inSUBSTANTIALCHANGESto disclosure, U.S. GAAP and XBRL.
  39. 39. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™39Public companies must adjust their reportingpractices to comply.
  40. 40. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™40CHALLENGETHE
  41. 41. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™41As a result of changing standards, internal controlshave to adapt to fit or else the risk of deficienciesand material weaknesses increases exponentially.
  42. 42. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™42Large scale accounting changes may be difficultbecause they can involve revamping processes,reassessing emerging risks and retraining staff.
  43. 43. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™43CFOs and their staff who have put off updatingtheir internal controls until new guidelines arereleased may find out they have a lot more workto do. Thats especially so for finance folks whowork for small and medium size entities, whichtend to have fewer resources than their peers atbigger companies do.66Brands, 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->
  44. 44. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™44SOLUTIONTHE
  45. 45. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™45Monitor exposure drafts and upcoming changes to SEC regulationsin order to anticipate how changes will affect the controlsAn internal auditing team that has access to changing regulationsand can identify weaknesses in reporting practices will be moreprepared to catch errorsUse available resources as benchmarks, like peer filings anddisclosures, to help implement best practices into riskmanagement systemsYou need to stop the bleeding,” says Ralph Geertsema, a director ofSeventyOne. “However many resources you need, that’s what it takes77Surka, 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>
  46. 46. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™46With only 45% of respondents saying themajority of their critical risks are well managed,the door to an expanded role is open andinternal audit must walk through it and take onthe attendant challenges.88“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>
  47. 47. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™47Staying Aheadof PeersNO.4
  48. 48. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™48REALITYTHE
  49. 49. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™49It’s survival of the fittest out there.
  50. 50. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™50There is a need for companies to think forwardusing information substantiated by real evidenceand competitive intelligence.
  51. 51. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™51CHALLENGETHE
  52. 52. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™52In order to keep up, companies are investing intechnologies and talent — even changing theirbusiness strategies in order to keep up.
  53. 53. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™53And yet, many must grapple with the challenges ofchoosing the right direction.
  54. 54. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™54SOLUTIONTHE
  55. 55. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™55Monitor peers and all industry players withreal-time information and enhanced data analysisMake strategic business partnerships based oninformed and compatible interests
  56. 56. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™56In organizations that excel at making criticaljudgments, the CFO and CIO understand thespecific decisions facing business leaders, thefinancial information that can be used to helpdrive those decisions, and the techniquesavailable to produce information quickly, easily,and accurately,says Robert Comeau, a principal with Deloitte Consulting LLP’s FinanceTransformation service.99“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/>
  57. 57. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™57Learn more about how disclosure researchsolutions can help you solve and enhance yourfinancial reporting processes so that reportingchallenges become opportunities.
  58. 58. www.DisclosureNet.com | Copyright © 2013 DisclosureNet™58Contact us.DisclosureNet™330 Bay Street, Suite 200Toronto, ON M5H 2S8T: 866.974.3638F: 416.913.0446General InquiriesT: 866.974.3638 x0info@disclosurenet.comSolutionsT: 866.974.3638 x2solutions@disclosurenet.com

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