We use cookies to give you the best online experience. By using our website you agree to our use of cookies in accordance with our cookie policy. Learn more here.Close Me
Despite growing pressure from shareholders and company boards, many European companies are struggling to reduce their accounts consolidation and reporting times, according to a new European research report by KPMG Consulting*. In 1999, European companies actually took two days longer to release their provisional figures to the press than in 1998, although most made small improvements in other measures of reporting speed. Inadequate figures supplied by operating companies and business units and mediocre operating systems, which are not properly linked with financial systems, seem to be two of the most significant obstacles to improvement.
The survey by KPMG Consulting of 252 listed European businesses, reveals a strong commitment to reducing reporting cycles. On average, the top 10 per cent of respondents release their final figures just 20 days after the year end. Even this seemingly impressive feat is, however, 13 days behind the average of the top 10 per cent of US companies.
Chris Bedell, principal consultant at KPMG Consulting, commented: "Despite growing external and internal pressures to accelerate reporting cycles, European companies still lag some way behind their US counterparts. What we often see is a gap between intention and implementation. As each financial year is completed, many organisations make ambitious plans to improve the consolidation and reporting processes the following year. Unfortunately, since reporting is often seen as 'an annual event' rather than a continuous process, the planned improvements are not addressed rapidly enough and reporting schedules for the next year are sent out to the subsidiaries based on historic practices. Once this has happened it is too late to instigate significant improvements for the current year."
Findings of the survey showed that:
Nordic businesses are the clear European leaders in the time it takes them to publish their final results. On average, businesses in Sweden take 31 days and those in Finland 37 days. This is in part due to more stringent, regulatory reporting requirements in Nordic countries than in other European countries. Figures released on an annual basis by the London Stock Exchange imply that the UK lags well behind the rest of Europe, but recommendations from the Accounting Standards Board encouraging businesses to meet a 42 working day (60 calendar day) target for the release of provisional figures, combined with pressure from shareholders, are encouraging UK businesses to catch up.
Meeting shareholders' expectations is seen as the most important reason for speeding up closing times. On a scale of one to seven, shareholder expectations achieved the highest average ranking of importance (at 5.35). Good investor relations have also been a key driver behind improvements in the US. Demand from company executives for more timely management information - enabling the company to respond more quickly to opportunities or nip potential problems in the bud - is perceived as the second most important driver.
European businesses in the information, communication and entertainment industries are the most efficient when it comes to publishing final figures, taking on average, 32 days. This may be due to external circumstances: these organisations operate in dynamic, fast moving environments and are perhaps under more pressure from investors to release their reports as early as possible.
Many organisations spend over half the working month preparing their monthly reports. 40 per cent of companies surveyed take 6-10 working days and 35 per cent take 11-15 days. Quarterly reports consume a similarly disproportionate amount of time, 25 per cent spend 6-10 working days, while 65 per cent spend 11 to 15 days.
Despite the fact that 58 per cent of companies now use specialised consolidation and reporting software (compared with 40 per cent in 1997) this has not significantly improved the efficiency of consolidation processes.
This is because, all too often, organisations replace poorly structured 'intergalactic' spreadsheets with consolidation packages, without improving the underlying process.
Chris Bedell commented: "While the legally required timetable for UK businesses to publish their results is a relatively relaxed 7 months, a company that is able to publish its results shortly after the year end is seen as having its internal organisation under control. Analysts are receiving company results earlier and earlier and there is a definite air of disapproval towards those companies whose results arrive later than the rest of the pack.
A focus on the implementation of best practice - by improving processes and IT systems and creating the right cultural atmosphere to motivate employees - will go a long way to solving these problems. The top ten per cent of KPMG Consulting's survey respondents took, on average, only 20 days to publish their results in 1999. These organisations are now reaping the benefits of significant improvements in their reporting cycles."
For further information, or assistance, please speak to your usual KPMG tax contact.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
In the recent decision of Trayhorn v. The Secretary of State for Justice the Employment Appeal Tribunal (EAT) held that a prison had not indirectly discriminated against a chaplain who was disciplined...
Gowling WLG's employment, labour & equalities experts bring you the latest top five employment law developments that may affect your business - what they are, and what you can do about them.
The Information Commissioner's Office (ICO) has updated its code of practice on subject access requests (SARs) to reflect two important Court of Appeal judgments published earlier this year...
In Government Legal Service (GLS) v Brookes, the EAT has considered whether refusing to make adjustments to a multiple choice situational judgment test for a job applicant with Asperger's syndrome...
In J v K and another, the Employment Appeal Tribunal has refused to exercise its discretion to extend the 42 day time limit for lodging an appeal where the Notice of Appeal was filed one hour late.
The EAT has dismissed an appeal by Asda in its on-going equal pay case involving a claim brought by over 7,000 current and former employees (the majority of which are women).
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
