Item III.1 Profiling methodology D. FRANCOZ Eurostat
ESTP Course How to compile statistics on global enterprises Item III.1Profiling methodology D. FRANCOZ Eurostat A little bit of terminology and acronyms
Before to start A little bit of terminology and acronyms GEG: global enterprise group, also known as MNE: MultiNational Enterprise group UCI: Ultimate Controlling Institutional Unit, aka GDC: Global Decision Center GEN: Global ENterprise TEN: Truncated Enterprise NSI: National Statistical Institute UCI NSI: main profiler Partnering NSI: country which has subsidiaries in the profiled GEG, but not the UCI What is profiling Profiling is a method
which analyses the legal operational and accounting structure of an enterprise group in order to establish enterprise units within that group (and their links to legal units) and explores the most efficient structures for the collection of statistical data. A need for looking at the whole elephant
Why to profile A need for looking at the whole elephant Why to profile Need to better take into account the globalisation of the economy The GEGs organise themselves at the global level The statistical representation of the GEGs may be different from the GEGs own vision National statistics don't take properly into account this global dimension Need to improve the consistency of business statistics in the EU Currently, practices differ from one country to another one In most countries, the legal unit is used for the enterprise as statistical unit To take into account the global dimension may change the statistics and the economic analysis Why to profile Need to better take into account the globalisation of the economy To take into account the global dimension may change the national statistics and the economic analysis Why to profile European Profiling will reconcile
Global vision of the groups on their activity National needs to observe economic activity European Profiling is the only way to properly delineate "enterprises" in multinational and complex EG. describe consistently the same GEG in all EU+EFTA countries Ensure consistency of treatment between countries Allow producing statistics at different geographical levels Fulfil both needs of national statistics and statistics on globalisation support efficient data collection in SBS, FATS, FDI & if possible in STS The profiling project Proposes a top down approach to define the new enterprises at two levels: The global enterprises (GEN) defined regardless of the geographic dimension The truncated enterprises (TEN): the national parts of the GEN GEN and TEN delineated in terms of legal units A collaborative process
Profiling: A collaborative process 1-With the Group 2-Within NSI: between profilers and Business statisticians 3-Between profilersin different NSIs European Profiling consists in
Centrally defining enterprises in the frame of multinational enterprise groups (GEG) Not only delineate the enterprises but also ensure that the enterprises defined are suitable for data collection and follow up The NSI of the UCI has the responsibility of defining the GENs and TENs The partnering NSIs have the responsibility to confirm the TENs in their country In both cases: discussion with statistical users is essential The main process steps are: Desk profiling (UCI NSI) Contact with the GEG (UCI NSI) Assess the UCI proposal (Partnering NSIs) How to profile 2 types of profiling Intensive profiling
For the largest and most complex GEG 600 GEGs in the target Light profiling For the less complex GEG but still large enough 1100 GEGs in the target Differences between intensive and light profiling Same desk activity Contact with the GEG not mandatory in light profiling Partnering exercise not mandatory, but highly recommended The steps of profiling UCI: Preparing for partnering exercise
2d delineation of GENs and TENs Contact the GEG Identify GEG for profiling Visit GEG, Obtain perimeter, employment and turnover variables Partnering exercise Confirmation of TENs UCI: Desk research 1st delineation of GENs and TENs Agreement on TENs and GENs End of the profiling process The tools for profiling
Detailed information per legal units Current templates: In the future: an interactive tool (the Interactive Profiling Tool) All about the profiling process The steps for profiling
Selection of the GEGs to be profiled in the EGR Target population: the 600 largest and most complex GEG in the EU Preparation, identification and defining at the global group level centrally by the NSI of the UCI Defining the UCI, that determines the responsibility for the profiling of the GEG Theoretically already done in the EGR Check the EGR information The steps for profiling
Desk preparation: Collect information on the legal structure, using EGR data determine the countries in which the GEG operates, and so determine the NSIs involved (partnering NSIs) collect information on the operational structure of the GEG, using the annual reports and information at GEG websites Collect the GEG information that is already available at the NSIs (e.g. from surveys) Derive and classify GENs at the global level as a proposal ( including identification) Analyse the operational structure of the GEG Prepare a proposal for the GEN structure List the legal units for each GEN The steps for profiling
Contact and visit the GEG To confirm the global perimeter of the GEG, the GENs and their delineation perimeter of the GEG (consolidation perimeter or list of the controlled affiliates) Number and name of GENs and TENs (IFRS 8 as a starting point) To collect data on the GENs and TENs(check the ability to produce consistent data at these levels) Ability for the GEG to produce at GEN/TEN level the minimum set of variables (employment, turnover, NACE) Ability to produce SBS variables (SBS are main providers of NA). Ability to produce other variables such as STS. Special attention to O-FATS information collected at the GEG level on country x Nace CODE, a concept close to enterprises in most cases The steps for profiling
Contact and visit the GEG GEG requests they know better financial and accounting data than any other they ask for a priority list and for a common list of variables they ask for common questionnaires to all European countries When consolidation is centralised they prefer to provide consistent information for each country at UCI level than at country level. The steps for profiling
Derive and classify TENs at the national level (including identification) List the legal units for each TEN Discuss the GENs and TENs with the statistical users Fill the templates that will be transmitted to the partnering countries Inform the NSIs of EU-countries in which the GEG operates on the draft profile and ask for comments Pass the TENs (and the lists of legal units) to the relevant NSIs for use as supplied in the national business register and for data collection. The steps for profiling
Partnering NSIs confirm the TEN receive proposed TENs (and links with leUs)from the leader NSI validate them through discussion with statistical users existence, Contents in terms of LeUs, suitability for data collection, organisation of data collection (which unit to follow?) agreement from the national GEG managers accept or re-discuss TENs with the UCI NSI Feedback process between the partnering and the UCI NSI until an agreement is reached Variables to be collected
For the GENs and TENs NACE Employment Turnover Variables in the BR regulation mandatory In addition: core variables Variables of the SBS regulation, annex1 Main output of each step Sources of information
GEG GENs TENs Legal units BR data UCI, Partnering SBS data (surveys or admin data) OFATS data UCI other national data available (STS, ) GEG annual report or web site GEG visit OFATS data is a valuable source of information for profiling and can be used as the source of turnover, employment and NACE to populate TENs' variables OFATS data supplied at the TEN level can be used alongside published annual accounts to validate national data. Organisation of data collection
Organisation inside the NSI May differ from one NSI to another Profiling together with BR and EGR Profiling together with SBS Profiling independent from both In small countries: multi-disciplinary teams (BR, SBS, STS, FATS) working part-time on profiling In any case, need for a good coordination between all actors Efficiently update EGR with profiling information Efficiently collect data for SBS (FATS) purposes Organisation of data collection
Different ways of collecting data for SBS purposes: Decentralised The UCI NSI collects only the minimum set of data for GEN and TEN National collection for SBS: By specific collection from TENs or GEG's national representative By consolidation of existing information (surveys or use of administrative data) Fully centralised By the UCI NSI for all the partnering countries On request of the GEG Requires an agreement with the GEG Requires a good coordination between involved countries Light vs. Intensive profiling Light vs. Intensive profiling
Light profiling Conditions for light profiling
Availability of the mandatory information of the following documents: Consolidated annual accounts With segment information by activity and country With the delineation of segments in terms of legal units Answer to the O-FATS survey That allows to delineate the GENs and TENs That allows to derive economic information on GEN (and TEN) These two sources are complementary. If mandatory information cannot be completed contact the GEG to complete the profiling. In that case, it will become an intensively profiled GEG If the GEG is small enough, convert to automatic procedure IPT: a tool to make coordination easier
IPT: Interactive Profiling Tool Allow profiling teams to smoothly exchange information during the profiling process, but respecting the confidentiality rules in force concerning exchanges of individual data. Centralise information on the GEN and the TEN for the group under profiling process. Release information on profiling to the users Be the central place of guidelines, metadata, templates and other documents related to International profiling. IPT: a tool to make coordination easier
What could be done with the ITP Exchange information between the EGR and the IPT (direct transfer from EGR to IPT) Exchange information between the national environment and the IPT (batch procedure) Modify information online for authorised members (profiling teams of the UCI or partnering countries) Read information on a given group Add new legal units Send notifications to the partnering or UCI countries during the profiling process (this should be done automatically according to some trigger signal) Example 1: SIEMENS Initial operating segments Geographical
organisation Example 1: SIEMENS Going in the detail of segments
Split of the "energy" segment Example 1: SIEMENS Split of the segments Energy segment
Industry segment Energy segment Infrastructures & Cities Example 1: SIEMENS Example 1: SIEMENS Employment figures Example 1: SIEMENS To be compared with the EGR list
List of subsidiaries: an extract First step: desk profiling
Example 1: SIEMENS First step: desk profiling Several options for GEN Consider only the 4 operational segments (Industry, Energy, Healthcare and Infrastructures and cities) and integrate the activity of the 3 cross-sector segments into them Requires information to split the activity of the cross sector businesses Siemens publishes information for these three cross sector businesses, but information is very poor for equity investments First step: desk profiling
Example 1: SIEMENS First step: desk profiling Split the Industry, Energy and Infrastructure segments into several global enterprises Segment information presented in the annual report detailed by sub-segments Requires checking the autonomy of enterprises defined in the frame of the segments Consider 6 global enterprises in line with the segments exclude equity investments Consider transversal activities in a segment "others" Need for a contact with the group A possible operational structure:
Example 1: SIEMENS A possible operational structure: GEN NACE 3Digit employment turnover (external revenue) in M Energy 351 86,000 27,302 Healthcare 266 51,000 13,600 Industry automation 27 105,000 9,563 Drive technologies 281 9,640 Instrastructures&Cities 302 89,000 16,731 financial services 649 3,000 859 others 701 36,000 1,031 Example 1: SIEMENS French organisation Example 1: SIEMENS French organisation Example 1: SIEMENS French organisation Example 1: SIEMENS French organisation Operational structure: Legal structure:
Example 1: SIEMENS Operational structure: a national restriction of the GENs Legal structure: Transversal to the economic structure One sub-holding which controls the most part of LeUs One LeU with activity in the 5 GENs Should be split into the different TENs 6 LeU which directly depend from SIEMENS AG GEN structure should be suitable for national purposes Way to collect information on TENs: See if SIEMENS SAS or SIEMENS SA could report for all the TENs Suitable for light profiling:
Example 2: BRICORAMA Suitable for light profiling: Medium size group: 3510 employees Active in 3 other EU countries Quasi monoactive Detailed segmental information incl. by country Detailed list of subsidiaries Possibility to delineate the global enterprises in terms of legal units Example 2: BRICORAMA Legal structure of the GEG Example 2: BRICORAMA Detailed list of subsidiaries Example 2: BRICORAMA Intra-group flows Example 2: BRICORAMA Income statement by TEN Example 2: BRICORAMA Balance sheet by TEN: assets Example 2: BRICORAMA Balance sheet by TEN: liabilities Conclusion: Example 2: BRICORAMA 1 GEN 5 TENs
NACE: 475 "Retail trade of other household equipment in specialised stores" Additional activity: windmill (NACE:3411: production of electricity) Currently side activity 5 TENs France, Belgium, Netherlands, Spain, Hong-Kong (small activity) Central collection of data at the UCI level is possible EGR and profiling: two different visions of the same "object"
Profiling and EGR EGR and profiling: two different visions of the same "object" EGR: legal structure of the global enterprise group Profiling: economic structure of the global enterprise group Interactions between the EGR and the profiling project
Profiling and EGR Interactions between the EGR and the profiling project The EGR: a fundament for profiling EGR: starting point of profiling Profiling population selected in the EGR UCI in EGR defines the profiling country EGR perimeter starting point for profiling Profiling: a fundament for EGR quality Global economic information on the GEG Delineation of GEN and TEN in terms of legal units and economic information on GEN and TEN Updated information on legal units Principles for a coordinated view between EGR and profiling
Profiling and EGR Principles for a coordinated view between EGR and profiling The perimeter of the groups treated in the IPT should be identical in the EGR and the IPT database at the beginning of the profiling process and at the end (when the country of the UCI considers the profiling to be achieved). The EGR should be updated by the IPT data (set of information to be defined). The common units in the EGR and on the IPT should be identified with to the same ID number It could be the LEID number for the legal unit and the group ID number for the group. Profiling and FATS FATS among the main statistical users for profiling (with SBS) Analytically: Same statistical unit "enterprise" followed in FATS and defined through profiling TEN are defined not only in EU, but worldwide TEN allow to produce information by country and activity Operationnally FATS can help profiling To delineate the GENs and TENs: especially for light profiling complete the annual report information to produce data by country and activity Profiling can collect information for FATS purposes Information collected on TENs (turnover, employment, NACE) also available for non-EU countries Thank you for your attention Annex: core variables 1- Strategic need:the main aggregates of the P&L by nature: needed as proxies of the GDP (productive analysis and NA providing) Annex: core variables 2- Completion of the P&L: useful to check consistency between operating and net results Annex: core variables 3- Identification, through the Financial Assessment, of the investment